Ratings: S&P: AA (Insured) A+ (Underlying) (See BOND INSURANCE, BOND INSURANCE RISK FACTORS and RATING herein)

Transcription

1 NEW ISSUE-BOOK-ENTRY-ONLY Ratings: S&P: AA (Insured) A+ (Underlying) (See BOND INSURANCE, BOND INSURANCE RISK FACTORS and RATING herein) OFFICIAL STATEMENT Dated: December 20, 2016 Interest on the Bonds is not excludable from gross income for federal tax purposes under existing law. (See TAX MATTERS herein.) MARBLE FALLS ECONOMIC DEVELOPMENT CORPORATION (Burnet County, Texas) $6,500,000 SALES TAX REVENUE BONDS, TAXABLE SERIES 2017 Dated: December 15, 2016 Due: August 1, as shown on page 2 The $6,500,000 Sales Tax Revenue Bonds, Taxable Series 2017 (the Bonds ) are special obligations of the Marble Falls Economic Development Corporation (the Corporation or the Issuer ). The Bonds are issued pursuant to a bond resolution (the Resolution ) adopted by the Board of Directors of the Corporation (the Board ) on December 20, 2016 and in accordance with certain provisions of the Development Corporation Act, currently codified at Chapters 501 and 505, Texas Local Government Code, as amended (previously codified as Article , Texas Revised Civil Statutes Annotated, as amended) (collectively, the "Act"). The Bonds, together with any Additional Parity Obligations, as defined herein, hereafter issued, are payable from and secured by a lien on and pledge of the Pledged Revenues, as defined herein, which include the receipts from a ½ of 1% sales and use tax collected within the boundaries of the City of Marble Falls, Texas (the City ) for the benefit of the Corporation. THE BONDS DO NOT CONSTITUTE OBLIGATIONS OF THE STATE OF TEXAS, THE CITY, BURNET COUNTY, ANY AGENCY OR ANY OTHER POLITICAL SUBDIVISION OF THE STATE OF TEXAS AND NEITHER THE FAITH AND CREDIT NOR THE TAXING POWER OF THE STATE OF TEXAS, THE CITY, BURNET COUNTY, ANY AGENCY OR ANY POLITICAL SUBDIVISION THEREOF IS PLEDGED AS SECURITY FOR THE PAYMENT OF THE BONDS. (See THE BONDS Security for Payment, "SECURITY FOR THE BONDS" and "THE SALES TAX Investor Considerations" herein.) Interest on the Bonds will accrue from December 15, 2016 (the Dated Date ) and will be payable initially on August 1, 2017, and on each February 1 and August 1 thereafter until maturity or prior redemption. Interest will be calculated on the basis of a 360-day year of twelve 30-day months. The definitive Bonds will be issued as fully registered obligations in book-entry form only and when issued will be registered in the name of Cede & Co., as nominee of The Depository Trust Company ( DTC ), New York, New York. DTC will act as securities depository (the Securities Depository ). Book-entry interests in the Bonds will be made available for purchase in the principal amount of $5,000 or any integral multiple thereof within a maturity. Purchasers of the Bonds ( Beneficial Owners ) will not receive physical delivery of certificates representing their interest in the Bonds purchased. So long as DTC or its nominee is the registered owner of the Bonds, the principal of and interest on the Bonds will be payable by BOKF, NA, Austin, Texas, as initial Paying Agent/Registrar, to the Securities Depository, which will in turn remit such principal and interest to its Participants, which will in turn remit such principal and interest to the Beneficial Owners of the Bonds. (See BOOK-ENTRY-ONLY SYSTEM herein.) Proceeds from the sale of the Bonds will be used to provide funds for the design and construction of a conference center with hotel and related restaurant facilities, including parking, concession services and open space improvements on Corporation owned property, and paying the costs of issuance of the Bonds. The Bonds maturing on and after August 1, 2026 are subject to optional redemption prior to maturity on August 1, 2025 or any date thereafter, in whole or in part, in principal amounts of $5,000 or integral multiples thereof, at the redemption price of par plus accrued interest to the redemption date. (See THE BONDS Redemption Provisions herein.) The scheduled payment of principal of and interest on the Bonds when due will be guaranteed under a municipal bond insurance policy to be issued concurrently with the delivery of the Bonds by BUILD AMERICA MUTUAL ASSURANCE COMPANY ( BAM ). (See BOND INSURANCE herein.) STATED MATURITY SCHEDULE (See page 2) The Bonds are offered for delivery when, as and if issued and received by the initial purchaser named below (the Underwriter ) subject to approval of legality by the Attorney General of the State of Texas and Bickerstaff Heath Delgado Acosta LLP, Austin, Texas, Bond Counsel. Certain matters will be passed upon for the Underwriter by its counsel, Andrews Kurth Kenyon LLP, Austin, Texas. The Bonds are expected to be available for delivery through DTC on or about January 18, RAYMOND JAMES

2 STATED MATURITY SCHEDULE (Due August 1) Base CUSIP: (a) Stated Interest Initial Maturity Principal Rate Yield CUSIP (8/1) Amount (%) (%) Suffix (a) 2017 $ 250, % 1.400% AA , % 1.900% AB , % 2.250% AC , % 2.650% AD , % 2.950% AE , % 3.150% AF , % 3.400% AG , % 3.550% AH , % 3.750% AJ , % 3.850% (b) AK4 $3,985, % Term Bond due August 1, 2036 Price to Yield 4.450% CUSIP Suffix: AV0 (a) (b) (Interest to accrue from the Dated Date) The Bonds maturing on and after August 1, 2026 are subject to optional redemption prior to maturity on August 1, 2025 or any date thereafter, in whole or in part, in principal amounts of $5,000 or integral multiples thereof, at the redemption price of par plus accrued interest to the redemption date. In addition, the Bonds maturing August 1, 2036 (the Term Bonds ) are subject to mandatory sinking fund redemption, as further described herein. (See THE BONDS Redemption Provisions Mandatory Sinking Fund Redemption herein.) (a) CUSIP numbers are included solely for the convenience of the owners of the Bonds. CUSIP is a registered trademark of the American Bankers Association. CUSIP data herein is provided by CUSIP Global Services, managed by S&P Capital IQ on behalf of the American Bankers Association. This data is not intended to create a database and does not serve in any way as a substitute for the CUSIP Services. None of the Corporation, the City, the Financial Advisor or the Underwriter is responsible for the selection or correctness of the CUSIP numbers set forth herein. (b) Yield shown is to first optional call date of August 1,

3 MARBLE FALLS ECONOMIC DEVELOPMENT CORPORATION th Street Marble Falls, Texas (830) BOARD OF DIRECTORS Name Position Term Expires (May) Steve Reitz President 2017 Vacant Vice President Mark Mayfield Director 2018 Jane Marie Hurst Director 2017 Lindsay Plant Director 2017 Judy Miller Director 2017 John Packer Director 2018 CITY COUNCIL Name Title Term Expires John Packer Mayor 2017 Jane Marie Hurst Mayor Pro Tem, Place Craig Magerkurth Councilmember, Place Reed Norman Councilmember, Place Rachel Austin-Cook Councilmember, Place Richard Westerman Councilmember, Place Ryan Nash Councilmember, Place ADMINISTRATION Name Position Length of Service With the City Christian Fletcher EDC Executive Director 5 years Midge Dockery Business Development Coordinator 1 year Mike Hodge City Manager 2 years Christina McDonald EDC Secretary 22 years Margie Cardenas Director of Finance 11 years CONSULTANTS AND ADVISORS Bond Counsel Financial Advisor Certified Public Accountants Bickerstaff Heath Delgado Acosta LLP Austin, Texas SAMCO Capital Markets, Inc. San Antonio, Texas Patillo, Brown & Hill, L.L.P. Waco, Texas For Additional Information Please Contact: Mr. Christian Fletcher Ms. Margie Cardenas Mr. Mark McLiney EDC Executive Director Director of Finance Mr. Andrew T. Friedman Marble Falls Economic Development Corporation City of Marble Falls SAMCO Capital Markets, Inc th Street rd Street 1020 NE Loop 410, Suit 640 Marble Falls, Texas Marble Falls, Texas San Antonio, Texas (830) (830) cfletcher@marblefallseconomy.com mcardenas@ci.marble-falls.tx.us mmcliney@samcocapital.com afriedman@samcocapital.com 3

4 USE OF INFORMATION IN THE OFFICIAL STATEMENT This Official Statement, which includes the cover page and the Appendices hereto, does not constitute an offer to sell or the solicitation of an offer to buy in any jurisdiction to any person to whom it is unlawful to make such offer, solicitation or sale. No dealer, broker, salesperson or other person has been authorized to give information or to make any representation other than those contained in this Official Statement, and, if given or made, such other information must not be relied upon. Certain information set forth herein has been provided by sources other than the Corporation that the Corporation believes to be reliable, but the Corporation and the City make no representation as to the accuracy of such information. In addition, certain information set forth herein has been obtained from the Corporation and other sources which are believed to be reliable but is not guaranteed as to accuracy or completeness, and is not to be construed as a representation by the Corporation, the City, the Financial Advisor or the Underwriter. Any information and expressions of opinion herein contained are subject to change without notice, and neither the delivery of the Official Statement nor any sale made hereunder shall, under any circumstances, create any implication that there has been no change in the affairs of the Corporation or other matters described herein since the date hereof. (See "CONTINUING DISCLOSURE OF INFORMATION" for a description of the Corporation's undertaking to provide certain information on a continuing basis.) The Underwriter has provided the following statement for inclusion in this Official Statement. The Underwriter has reviewed the information in this Official Statement pursuant to its responsibilities to investors under the federal securities laws, but the Underwriter does not guarantee the accuracy or completeness of such information. NONE OF THE CITY, ITS FINANCIAL ADVISOR OR THE UNDERWRITER MAKES ANY REPRESENTATION OR WARRANTY WITH RESPECT TO THE INFORMATION CONTAINED IN THIS OFFICIAL STATEMENT REGARDING THE DEPOSITORY TRUST COMPANY ( DTC ) OR ITS BOOK-ENTRY-ONLY SYSTEM, OR ANY INFORMATION UNDER THE CAPTION BOND INSURANCE REGARDING BUILD AMERICA MUTUAL ASSURANCE COMPANY ( BAM ) OR ITS POLICY, AS SUCH INFORMATION HAS BEEN FURNISHED BY DTC AND BAM, RESPECTIVELY. BAM makes no representation regarding the Bonds or the advisability of investing in the Bonds. In addition, BAM has not independently verified, makes no representation regarding, and does not accept any responsibility for the accuracy or completeness of this Official Statement or any information or disclosure contained herein, or omitted herefrom, other than with respect to the accuracy of the information regarding BAM, supplied by BAM and presented under the heading BOND INSURANCE and APPENDIX F - Specimen Municipal Bond Insurance Policy. THE BONDS ARE EXEMPT FROM REGISTRATION WITH THE UNITED STATES SECURITIES AND EXCHANGE COMMISSION AND CONSEQUENTLY HAVE NOT BEEN REGISTERED THEREWITH. THE REGISTRATION, QUALIFICATION, OR EXEMPTION OF THE BONDS IN ACCORDANCE WITH APPLICABLE SECURITIES LAW PROVISIONS OF THE JURISDICTION IN WHICH THE BONDS HAVE BEEN REGISTERED, QUALIFIED OR EXEMPTED SHOULD NOT BE REGARDED AS A RECOMMENDATION THEREOF. IN CONNECTION WITH THE OFFERING OF THE BONDS, THE UNDERWRITER MAY OVER-ALLOT OR EFFECT TRANSACTIONS WHICH STABILIZE OR MAINTAIN THE MARKET PRICE OF THE BONDS AT A LEVEL ABOVE THAT WHICH MIGHT PREVAIL IN THE OPEN MARKET. SUCH STABILIZING, IF COMMENCED, MAY BE DISCONTINUED AT ANY TIME. THE COVER PAGE CONTAINS CERTAIN INFORMATION FOR GENERAL REFERENCE ONLY AND IS NOT INTENDED AS A SUMMARY OF THE OFFERING OF THE BONDS. INVESTORS SHOULD READ THE ENTIRE OFFICIAL STATEMENT, INCLUDING ALL APPENDICES ATTACHED HERETO, TO OBTAIN INFORMATION ESSENTIAL TO MAKING AN INFORMED INVESTMENT DECISION. THIS OFFICIAL STATEMENT CONTAINS FORWARD-LOOKING STATEMENTS WITHIN THE MEANING OF SECTION 21E OF THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED. SUCH STATEMENTS MAY INVOLVE KNOWN AND UNKNOWN RISKS, UNCERTAINTIES AND OTHER FACTORS WHICH MAY CAUSE THE ACTUAL RESULTS, PERFORMANCE, AND/OR ACHIEVEMENTS TO BE DIFFERENT FROM FUTURE RESULTS, PERFORMANCE, AND ACHIEVEMENTS EXPRESSED OR IMPLIED BY SUCH FORWARD-LOOKING STATEMENTS. INVESTORS ARE CAUTIONED THAT THE ACTUAL RESULTS COULD DIFFER MATERIALLY FROM THOSE SET FORTH IN THE FORWARD-LOOKING STATEMENTS. (See OTHER PERTINENT INFORMATION Forward-Looking Statements Disclaimer herein.) 4

5 TABLE OF CONTENTS STATED MATURITY SCHEDULE... 2 BOARD OF DIRECTORS... 3 CITY COUNCIL... 3 ADMINISTRATION... 3 CONSULTANTS AND ADVISORS... 3 USE OF INFORMATION IN THE OFFICIAL STATEMENT... 4 TABLE OF CONTENTS... 5 SUMMARY STATEMENT... 6 OFFICIAL STATEMENT... 8 INTRODUCTION... 8 SOURCES AND USES OF FUNDS... 8 THE BONDS... 9 General... 9 Authorization... 9 Security for Payment... 9 Use of Bond Proceeds... 9 Redemption Provisions... 9 Payment Record Legality Amendments Defeasance Bondholders Remedies THE CORPORATION THE PROJECT THE CITY REGISTRATION, TRANSFER AND EXCHANGE Paying Agent/Registrar Record Date Future Registration Limitation on Transfer or Exchange of Bonds Replacement Bonds BOOK-ENTRY-ONLY SYSTEM Use of Certain Terms in Other Sections of this Official Statement SECURITY FOR THE BONDS Pledge Under the Resolution The Pledged Revenue Fund General Covenant Regarding the Sales Tax Flow of Funds Reserve Fund Requirements Surety Policy Additional Parity Bonds THE SALES TAX Investor Considerations BOND INSURANCE BOND INSURANCE RISK FACTORS Claims-Paying Ability and Financial Strength of Municipal Bond Insurers INVESTMENT AUTHORITY AND INVESTMENT PRACTICES OF THE ISSUER Legal Investments Investment Policies Additional Provisions Current Investments ANTICIPATED ISSUANCE OF ADDITIONAL DEBT RATING TAX MATTERS Payments of Interest Disposition or Retirement Informatin Reporting and Backup Withholding CONTINUING DISCLOSURE OF INFORMATION Annual Reports Notice of Certain Events Availability of Information from MSRB Limitations and Amendments Compliance with Prior Agreements OTHER PERTINENT INFORMATION Legal Matters Registration and Qualification of Bonds for Sale Litigation Legal Investments and Eligibility to Secure Public Funds in Texas Underwriting Forward-Looking Statements Disclaimer Financial Advisor Miscellaneous Financial Information of the Issuer... APPENDIX A General Information Regarding the City of Marble Falls, Texas and Burnet County, Texas... APPENDIX B Form of Legal Opinion of Bond Counsel... APPENDIX C Selected Provisions of the Resolution... APPENDIX D Excerpts from the City of Marble Falls, Texas Audited Financial Statements for Fiscal Year Ended September 30, APPENDIX E Specimen Municipal Bond Insurance Policy... APPENDIX F The cover page, subsequent pages hereof and appendices attached hereto, are part of this Official Statement. 5

6 SUMMARY STATEMENT This Summary Statement is subject in all respects to the more complete information and to the definitions contained or incorporated in this Official Statement. The offering of the Bonds to potential investors is made only by means of this entire Official Statement. No person is authorized to detach this Summary Statement from this Official Statement or to otherwise use it without the entire Official Statement. The Issuer The Bonds Paying Agent/ Registrar Redemption Provisions Security Use of Proceeds Bond Insurance Rating The Marble Falls Economic Development Corporation (the Corporation ) is a nonprofit development corporation formed pursuant to the Development Corporation Act of 1979 and governed by Section 4B of the Act now codified at Chapters 501 and 505, Texas Local Government Code, as amended (collectively, the Act ). The Corporation was created upon approval of a vote of the residents of the City of Marble Falls, Texas (the City ) and is governed by a seven-member board of directors (the Board ) appointed by the City Council of the City. The Corporation is funded with a one-half of one percent (1/2%) sales and use tax collected within the boundaries of the City. The Corporation was created to support new and existing businesses in the City by thoughtfully and carefully reinvesting sales tax dollars into worthwhile projects and programs. When working on enhancing the City s amenities, the Corporation encourages the creation of new wealth by gains in jobs and capital investments. For financial reporting purposes, the Corporation is reported as if it were a part of the City s operations because it provides services entirely for the City. The Bonds are special obligations of the Corporation issued pursuant to a resolution (the Resolution ) adopted by the Board of the Corporation on December 20, 2016, in accordance with the Act. (See THE BONDS Authorization herein.) The initial Paying Agent/Registrar is BOKF, NA, Austin, Texas. The Corporation intends to use the Book-Entry-Only System of DTC (defined herein). (See REGISTRTION, TRANSFER AND EXCHANGE - Paying Agent/Registrar" and BOOK-ENTRY-ONLY SYSTEM herein.) The Bonds maturing on and after August 1, 2026 are subject to optional redemption prior to maturity on August 1, 2025 or any date thereafter, in whole or in part, in principal amounts of $5,000 or integral multiples thereof, at the redemption price of par plus accrued interest to the redemption date. In addition, the Bonds maturing August 1, 2036 (the Term Bonds ) are subject to mandatory sinking fund redemption, as further described herein. (See THE BONDS Redemption Provisions Mandatory Sinking Fund Redemption herein.) The Bonds are payable solely from and are secured by a lien on and pledge of certain Pledged Revenues (defined herein) which include the gross receipts from a ½ of 1% sales and use tax (the "Sales Tax") levied and collected within the City for the benefit of the Corporation. The Sales Tax was authorized at an election held by and within the City on May 12, The total rate of all State and local sales and use taxes levied in the City is currently 8¼%. The Bonds are not obligations of the State of Texas, the City, Burnet County, any agency, or any other political subdivision and shall never be payable from ad valorem taxes. (See THE BONDS Security for Payment, "SECURITY FOR THE BONDS" and "THE SALES TAX herein.) Proceeds from the sale of the Bonds will be used to provide funds for the design and construction of a conference center with hotel and related restaurant facilities, including parking, concession services and open space improvements on Corporation owned property, and paying the costs of issuance of the Bonds. The scheduled payment of principal of and interest on the Bonds when due will be guaranteed under a municipal bond insurance policy to be issued concurrently with the delivery of the Bonds by BUILD AMERICA MUTUAL ASSURANCE COMPANY ( BAM ). (See BOND INSURANCE and BOND INSURANCE RISK FACTORS herein.) S&P Global Ratings ( S&P ) has assigned a rating of AA to the Bonds with the understanding that, concurrently with the delivery of the Bonds, a municipal bond insurance policy will be issued by BAM. The Corporation has received an underlying rating of A+ from S&P. (See BOND INSURANCE and BOND INSURANCE RISK FACTORS herein.) 6

7 Book-Entry-Only System Taxable Obligations The Issuer intends to utilize the Book-Entry-Only System of the Depository Trust Company ( DTC ), New York, New York described herein. No physical delivery of the Bonds will be made to the beneficial owners of the Bonds. Such Book-Entry-Only System may affect the method and timing of payments on the Bonds and the manner in which the Bonds may be transferred. (See BOOK-ENTRY-ONLY SYSTEM herein.) Interest to be paid on the Bonds is included in the gross income of the owners thereof for federal tax purposes. (See TAX MATTERS herein.) Additional Bonds Delivery Legality Under the Resolution, additional bonds, notes or other obligations ( Additional Parity Obligations ) may be issued by the Corporation on a parity with the Bonds secured by the pledge of and lien on the receipts of the Sales Tax, subject to certain conditions, including the Pledged Revenues that were, during either the next preceding fiscal year, or any twelve (12) consecutive calendar months in the eighteen (18) months next preceding the month in which the resolution was adopted authorizing the then proposed Additional Parity Obligations, at least equal to 1.50 times the maximum annual principal and interest requirements for all Parity Obligations and any Additional Parity Obligations outstanding after the issuance of the then proposed Additional Parity Obligations. (See SECURITY FOR THE BONDS - Additional Parity Obligations herein.) When issued, anticipated on or about January 18, Delivery of the Bonds is subject to the approval by the Attorney General of the State of Texas and the rendering of an opinion as to legality by Bickerstaff Heath Delgado Acosta LLP, Bond Counsel, Austin, Texas. 7

8 OFFICIAL STATEMENT relating to $6,500,000 MARBLE FALLS ECONOMIC DEVELOPMENT CORPORATION SALES TAX REVENUE BONDS, TAXABLE SERIES 2017 INTRODUCTION The purpose of this Official Statement, which includes the cover page and Appendices hereto, is to set forth information regarding the issuance by the Marble Falls Economic Development Corporation (the "Corporation" or the Issuer ) of its $6,500,000 Sales Tax Revenue Bonds, Taxable Series 2017 (the "Bonds"). The Bonds are being issued pursuant to certain provisions of the Development Corporation Act, including provisions of Chapters 501 and 505, Texas Local Government Code, as amended (collectively, the "Act"), and pursuant to the provisions of a resolution (the "Resolution") adopted by the Board of Directors of the Corporation (the Board") on December 20, All capitalized terms used herein and not otherwise defined herein shall have the meanings assigned to such terms in the Resolution. (See "APPENDIX D - Selected Provisions of the Resolution" herein.) The creation of the Corporation was approved by the City Council of the City of Marble Falls, Texas (the City ) pursuant to a resolution adopted on August 13, 2007, to benefit and accomplish the public purposes of, and to act on behalf of, the City as prescribed by the Act. At an election held on May 12, 2007, the voters of the City approved a one-half of one percent (1/2%) sales and use tax to be levied within the City (the Sales Tax ) which, pursuant to the Act, may be pledged to secure obligations of the Corporation. The Sales Tax, together with all other state and municipal sales and use taxes levied within the City, produces a total sales and use tax rate of 8¼% percent, the maximum rate currently permitted by the State (defined below) law. (See THE SALES TAX herein.) The Corporation was created to support new and existing businesses in the City by thoughtfully and carefully reinvesting sales tax dollars into worthwhile projects and programs. When working on enhancing the City s amenities, the Corporation encourages the creation of new wealth by gains in jobs and capital investments. For financial reporting purposes, the Corporation is reported as if it were a part of the City s operations because it provides services entirely for the City. The City Council of the City appoints the members of the Board. The City is required to approve certain actions of the Corporation, including the issuance of the Bonds by the Corporation. (See THE CORPORATION herein.) There follows in this Official Statement brief descriptions of the Bonds and their security, the Corporation, the City and its economy, and the Resolution. ALL DESCRIPTIONS OF DOCUMENTS CONTAINED HEREIN ARE ONLY SUMMARIES AND ARE QUALIFIED IN THEIR ENTIRETY BY REFERENCE TO EACH SUCH DOCUMENT. Copies of such documents may be obtained from the Corporation. This Official Statement speaks only as to its date, and the information contained herein is subject to change. A copy of the Official Statement pertaining to the Bonds will be filed with the Municipal Securities Rulemaking Board through its Electronic Municipal Markets Access (EMMA) system. See CONTINUING DISCLOSURE OF INFORMATION herein for a description of the Corporation s undertaking to provide certain information on a continuing basis. All financial and other information presented in this Official Statement has been provided by the Corporation and the City from their records, except for information expressly attributed to other sources. The presentation of information, including tables of receipts from taxes and other sources, is intended to show recent historic information and is not intended to indicate future or continuing trends in the financial position or other affairs of the Corporation. No representation is made that past experience, as is shown by that financial and other information, will necessarily continue or be repeated in the future. (See OTHER PERTINENT INFORMATION - Forward-Looking Statements Disclaimer herein.) SOURCES AND USES OF FUNDS The proceeds from the sale of the Bonds will be applied approximately as follows: Sources of Funds Par Amount $ 6,500, Original Issue Reoffering Premium 173, Accrued Interest 26, Total Sources of Funds $ 6,700, Uses of Funds Deposit to Project Fund $ 6,500, Cost of Issuance (including insurance premium) 129, Underwriter s Discount 44, Accrued Interest Deposit to Debt Service Fund 26, Total Uses of Funds $ 6,700,

9 THE BONDS General The Bonds will be dated December 15, 2016 (the Dated Date ), and interest payable on the Bonds will be calculated on the basis of a 360-day year consisting of twelve 30-day months. The Bonds will bear interest from the Dated Date. The Bonds will mature on the dates and in the principal amounts set forth on page 2 of this Official Statement. Interest on the Bonds is payable initially on August 1, 2017, and on each August 1 and February 1 thereafter until maturity or prior redemption. The Bonds will be issued only as fully registered obligations in book-entry form only, in denominations of $5,000 principal amount or any integral multiple thereof within a stated maturity. Initially, the Bonds will be registered and delivered only to Cede & Co., the nominee of The Depository Trust Company, New York, New York ( DTC ) pursuant to the Book-Entry-Only System described herein. No physical delivery of the Bonds will be made to the beneficial owners. Principal of, premium, if any, and interest on the Bonds will be payable by the Paying Agent/Registrar to Cede & Co., which will distribute the amounts paid to the participating members of DTC for subsequent payment to the beneficial owners of the Bonds. (See BOOK-ENTRY-ONLY SYSTEM herein for a more complete description of such system.) Authorization The Bonds are special obligations of the Corporation issued pursuant to the Resolution and in accordance with the Constitution and the general laws of the State of Texas (the State ), including the Act. Security for Payment The Bonds, together with any Additional Parity Obligations (as defined below) hereafter issued, are payable solely from and are secured by a lien on and pledge of the Pledged Revenues (defined below) which include the gross receipts from a one-half of one percent (½%) additional sales and use tax (the "Sales Tax") levied and collected within the City for the benefit of the Corporation. The Sales Tax was authorized at an election held by and within the City on May 12, The total rate of all State and local sales and use taxes levied in the City is currently 8¼%. The Bonds are not obligations of the State, the City, Burnet County, any agency or any other political subdivision of the State and shall never be payable from ad valorem taxes. Use of Bond Proceeds Proceeds from the sale of the Bonds will be used to provide funds for the design and construction of a conference center with hotel and related restaurant facilities, including parking, concession services and open space improvements on Corporation owned property, and paying the costs of issuance of the Bonds. In accordance with the Act, the Corporation approved the projects for purposes related to projects to promote new or expected business development, as provided by Section , Texas Local Government Code. The Corporation published the requisite notices and conducted public hearings on the proposed projects on November 2, The City Council conducted a public hearing on the proposed project on December 6, The City Council adopted a resolution authorizing the projects on December 20, Redemption Provisions Optional Redemption: The Issuer reserves the right, at its option, to redeem the Bonds maturing on and after August 1, 2026 on August 1, 2025, or any date thereafter, in whole or in part, in principal amounts of $5,000 or any integral multiple thereof (and, if within a stated maturity, selected at random and by lot by the Paying Agent/Registrar (defined herein), at the redemption price of par plus accrued interest to the date fixed for redemption. Mandatory Sinking Fund Redemption: The Bonds maturing August 1, 2036 (the Term Bonds ) are subject to mandatory sinking fund redemption in part prior to their stated maturity, and will be redeemed by the Issuer at the redemption prices equal to the principal amounts thereof plus interest accrued thereon to the redemption dates, on the dates and in the principal amounts shown in the following schedule: * Final Maturity Term Bond August 1, 2036 Redemption Date Principal Amount August 1, 2027 $320,000 August 1, ,000 August 1, ,000 August 1, ,000 August 1, ,000 August 1, ,000 August 1, ,000 August 1, ,000 August 1, ,000 August 1, 2036* 485,000 9

10 At least forty five (45) days prior to each mandatory redemption date specified above that the Term Bonds are to be mandorily redeemed, the Paying Agent/Registrar shall select by lot the numbers of the Term Bonds to be redeemed on the next following August 1 from moneys set aside for that purpose in the Bond Fund (as defined in the Resolution). Any Term Bond not selected for prior redemption shall be paid on the date of their Stated Maturity. The principal amount of the Term Bonds required to be redeemed on a mandatory redemption date may be reduced, at the option of the Corporation, by the principal amount of Term Bonds which, at least fifty (50) days prior to the mandatory redemption date, (1) shall have been defeased or acquired by the Corporation at a price not exceeding the principal amount of such Term Bonds plus accrued interest to the date of purchase thereof, and delivered to the Paying Agent/Registrar for cancellation or (2) shall have been purchased and canceled by the Paying Agent/Registrar at the request of the Corporation with money in the Bond Fund. Notice: Not less than 30 days prior to the date fixed for any such redemption, the Issuer shall cause a written notice of such redemption to be deposited in the United States mail, postage prepaid, addressed to each registered owner of a Bond to be redeemed at the address shown on the registration books of the Paying Agent/Registrar at the close of business on the business day next preceding the date of mailing such notice. ANY NOTICE OF REDEMPTION SO MAILED TO THE REGISTERED OWNERS WILL BE DEEMED TO HAVE BEEN DULY GIVEN IRRESPECTIVE OF WHETHER ONE OR MORE OF THE REGISTERED OWNERS FAILED TO RECEIVE SUCH NOTICE. By the date fixed for any such redemption, due provision shall be made with the Paying Agent/Registrar for the payment of the required redemption price for the Bonds or portions thereof which are to be so redeemed. If such notice of redemption is given and if due provisions for such payment are made, all as provided above, the Bonds or portions thereof which are to be redeemed thereby automatically shall be treated as redeemed prior to their scheduled maturities, and they shall not bear interest after the date fixed for redemption, and they shall not be regarded as being outstanding except for the right of the registered owner to receive the redemption price from the Paying Agent/Registrar out of the funds provided for such payment. The Issuer reserves the right to give notice of its election or direction to optionally redeem Bonds conditioned upon the occurrence of subsequent events. Such notice may state (i) that the redemption is conditioned upon the deposit of moneys and/or authorized securities, in an amount equal to the amount necessary to effect the redemption, with the Paying Agent/Registrar, or such other entity as may be authorized by law, no later than the redemption date or (ii) that the Issuer retains the right to rescind such notice at any time prior to the scheduled redemption date if the Issuer delivers a certificate of the Issuer to the Paying Agent/Registrar instructing the Paying Agent/Registrar to rescind the redemption notice, and such notice of redemption shall be of no effect if such moneys and/or authorized securities are not so deposited or if the notice is rescinded. The Paying Agent/Registrar shall give prompt notice of any such rescission of a conditional notice of redemption to the affected owners. Any Bonds subject to conditional redemption where redemption has been rescinded shall remain outstanding. The Paying Agent/Registrar and the Issuer, so long as a Book-Entry-Only System is used for the Bonds, will send any notice of redemption, notice of proposed amendment to the Bonds or other notices with respect to the Bonds only to DTC. Any failure by DTC to advise any DTC participant, or of any DTC participant or indirect participant to notify the Beneficial Owner, will not affect the validity of the redemption of the Bonds called for redemption or any other action premised on any such notice. Redemption of portions of the Bonds by the Issuer will reduce the outstanding principal amount of such Bonds held by DTC. In such event, DTC may implement, through its Book-Entry-Only System, a redemption of such Bonds held for the account of DTC participants in accordance with its rules or other agreements with DTC participants and then DTC participants and indirect participants may implement a redemption of such Bonds from the Beneficial Owners. Any such selection of Bonds to be redeemed will not be governed by the Ordinance and will not be conducted by the Issuer or the Paying Agent/Registrar. Neither the Issuer nor the Paying Agent/Registrar will have any responsibility to DTC participants, indirect participants or the persons for whom DTC participants act as nominees, with respect to the payments on the Bonds or the providing of notice to DTC participants, indirect participants, or Beneficial Owners of the selection of portions of the Bonds for redemption. (See "BOOK-ENTRY-ONLY SYSTEM" herein.) Payment Record The Corporation has not defaulted on the payment of its bonded indebtedness. Legality The Bonds are offered when, as and if issued, subject to the approval by the Attorney General of the State and the rendering of an opinion as to legality by Bickerstaff Heath Delgado Acosta LLP, Austin, Texas ( Bond Counsel ). A form of the legal opinion of Bond Counsel appears in APPENDIX C attached hereto. Amendments In the Resolution, the Issuer has reserved the right to amend the Resolution without the consent of any holder for the purpose of amending or supplementing the Resolution to cure any ambiguity, inconsistency, or formal defect or omission therein. In addition, the Corporation may, with the written consent of the Owners of the Bonds holding a majority in aggregate principal amount of the Bonds then outstanding, amend, add to, or rescind any of the provisions of the Resolution; provided that, without the consent of all Owners of outstanding Bonds effected, no such amendment, addition, or rescission shall (i) extend the time or times of payment of the principal of and interest on the Bonds, reduce the principal amount thereof, the redemption price therefor, or the rate of interest thereon, or in any other way modify the terms of payment of the principal of or interest on the Bonds, (ii) give any preference to any Bond over any other Bond, or (iii) reduce the aggregate principal amount of Bonds or Parity Obligations required to be held by Owners for consent to any such amendment, addition, or rescission. 10

11 Defeasance The Resolution provides for the defeasance of the Bonds when payment of the principal amount of the Bonds plus interest accrued on the Bonds to their due date (whether such due date be by reason of stated maturity, redemption, or otherwise), is provided by irrevocably depositing with a paying agent, or other authorized escrow agent, in trust (1) money in an amount sufficient to make such payment, and/or (2) Defeasance Securities (defined below), that to mature as to principal and interest in such amounts and at such times to insure the availability, without reinvestment, of sufficient money to make such payment, and all necessary and proper fees, compensation and expenses of the paying agent for the Bonds. The Corporation has additionally reserved the right, subject to satisfying the requirements of (1) and (2) above, to substitute other Defeasance Securities originally deposited, to reinvest the uninvested moneys on deposit for such defeasance and to withdraw for the benefit of the Corporation moneys in excess of the amount required for such defeasance. The Resolution provides that Defeasance Securities means any securities and obligations now or hereafter authorized by State law that are eligible to discharge obligations such as the Bonds. Current State law permits defeasance with the following types of securities: (a) direct, noncallable obligations of the United States of America, including obligations that are unconditionally guaranteed by the United States of America, (b) noncallable obligations of an agency or instrumentality of the United States of America, including obligations that are unconditionally guaranteed or insured by the agency or instrumentality and that, on the date of the purchase thereof, are rated as to investment quality by a nationally recognized investment rating firm not less than AAA or its equivalent, (c) noncallable obligations of a state or an agency or a county, municipality, or other political subdivision of a state that on the date the governing body of the Corporation adopts or approves the proceedings authorizing the financial arrangements have been refunded and are rated as to investment quality by a nationally recognized investment rating firm not less than AAA or its equivalent, and (d) any additional securities and obligations hereafter authorized by State law as eligible for use to accomplish the discharge of obligations such as the Bonds. There is no assurance that the ratings for U.S. Treasury securities acquired to defease any Bonds, or those for any other Defeasance Securities, will be maintained at any particular rating category. Further, there is no assurance that current State law will not be amended in a manner that expands or contracts the list of permissible defeasance securities (such list consisting of these securities identified in clauses (a) through (c) above), or any rating requirement thereon, that may be purchased with defeasance proceeds relating to the Bonds ( Defeasance Proceeds ), though the Corporation has reserved the right to utilize any additional securities for such purpose in the event the aforementioned list is expanded. Because the Resolution does not contractually limit such permissible defeasance securities and expressly recognizes the ability of the Corporation to use lawfully available Defeasance Proceeds to defease all or any portion of the Bonds, registered owners of Bonds are deemed to have consented to the use of Defeasance Proceeds to purchase such other defeasance securities, notwithstanding the fact that such defeasance securities may not be of the same investment quality as those currently identified under State law as permissible defeasance securities. Upon such deposit as described above, such Bonds shall no longer be regarded to be outstanding or unpaid. After firm banking and financial arrangements for the discharge and final payment of the Bonds have been made as described above, all rights of the Corporation to initiate proceedings to call the Bonds for redemption or take any other action amending the terms of the Bonds are extinguished; provided, however, the Corporation has the option, to be exercised at the time of the defeasance of the Bonds, to call for redemption at an earlier date those Bonds which have been defeased to their maturity date, if the Corporation (i) in the proceedings providing for the firm banking and financial arrangements, expressly reserves the right to call the Bonds for redemption, (ii) gives notice of the reservation of that right to the owners of the Bonds immediately following the making of the firm banking and financial arrangements, and (iii) directs that notice of the reservation be included in any redemption notices that it authorizes. Bondholders Remedies The Resolution establishes the following as events of default with respect to the Bonds: (i) the failure to make payment of the principal of or interest on any of the Bonds when the same becomes due and payable; or (ii) default in the performance or observance of any other covenant, agreement or obligation of the Corporation, the failure to perform which materially and adversely affects the rights of the Owners, including but not limited to, their prospect or ability to be repaid in accordance with the Resolution, and the continuation thereof for a period of 30 days after notice of such default is given by any Owner to the Corporation. Except for the remedy of mandamus to enforce the Corporation's covenants and obligations under the Resolution, the Resolution does not establish any other remedies with respect to events of default. Notwithstanding the foregoing, the provider of a municipal bond insurance policy relating to the Bonds, if any (identified herein as the Bond Insurer ), shall have the right to direct all remedies upon an event of default, and the Bond Insurer will be recognized as the registered owner of the Bonds for the purposes of exercising all rights and privileges available to the Bondholders. The issuance of a writ of mandamus is controlled by equitable principles and rests with the discretion of the court, but may not be arbitrarily refused. Under State law there is no right to the acceleration of maturity of the Bonds upon the failure of the Corporation to observe any covenant under the Resolution. Although a registered owner of Bonds could presumably obtain a judgment against the Corporation if a default occurred in the payment of the principal of or interest on any such Bonds, such judgment could not be satisfied by execution against any property of the Corporation other than the Pledged Revenues. Such registered owner's only practical remedy, if a default occurs, is a mandamus or mandatory injunction proceeding to compel the Corporation to observe or perform any of its obligations under the Resolution. The enforcement of any such remedy may be difficult and time consuming and a registered owner could be required to enforce such remedy on a periodic basis. The Resolution does not provide for the appointment of a trustee to represent the interests of the bondholders upon any failure of the Corporation to perform in accordance with the terms of the Resolution, or upon any other condition. Furthermore, the Corporation is eligible to seek relief from its creditors under the U.S. Bankruptcy Code. The opinion of Bond Counsel will note that all opinions relative to the enforceability of the Resolution and the Bonds are qualified with respect to the customary rights of debtors relative to their creditors. The Texas Supreme Court ruled in Tooke v. City of Mexia, 197 S.W.3d 325 (Tex. 2006) that a waiver of sovereign immunity in a contractual dispute must be provided for by statute in clear and unambiguous language. Because the Corporation is a component unit of the City, an analysis of relevant sovereign immunity municipal case law is described below. Tooke, and subsequent jurisprudence, held that a municipality is not immune from suit for torts committed in the performance of its proprietary functions, as it is for torts committed in the performance of its governmental functions (the Proprietary-Governmental Dichotomy ). Governmental functions are those that are enjoined on a municipality by law and are given by the State as a part of the State s sovereignty, to be exercised by the municipality in the interest of the general public, while proprietary functions are those that a municipality may, in its discretion, perform in the interest of the inhabitants of municipality. In Wasson Interests, Ltd., v. City of Jacksonville, ( Wasson ) the Texas Supreme Court (the Court ) addressed whether the distinction between governmental and proprietary acts (as found in tort-based causes of action) applies to breach of contract claims against municipalities. The Court analyzed the rationale behind the Proprietary-Governmental Dichotomy to determine that a city s proprietary functions are not done pursuant to the will of the people and protecting such municipalities via the [S]tate s immunity is 11

12 not an efficient way to ensure efficient allocation of [S]tate resources. While the Court recognized that the distinction between government and proprietary functions is not clear, the Wasson opinion held that the Proprietary-Governmental Dichotomy applies in contract-claims context. Therefore, in regard to municipal contract cases (as in tort claims), it is incumbent on the courts to determine whether a function is proprietary or governmental based upon the statutory guidance and definitions found in the Texas Civil Practice and Remedies Code. Notwithstanding the foregoing new case law issued by the Court, such sovereign immunity issues have not been adjudicated in relation to bond matters (specifically, in regard to the issuance of municipal debt or debt issued by a special purpose entity in which a city derives a benefit). Each situation will be prospectively evaluated based on the facts and circumstances surrounding the contract in question to determine if a suit, and subsequently, a judgment, is justiciable against a municipality or a corporation. Furthermore, the Corporation is eligible to seek relief from its creditors under Chapter 9 of the U.S. Bankruptcy Code ("Chapter 9"). Although Chapter 9 provides for the recognition of a security interest represented by a specifically pledged source of revenues, the pledge of taxes in support of a general obligation of a bankrupt entity is not specifically recognized as a security interest under Chapter 9. Chapter 9 also includes an automatic stay provision that would prohibit, without Bankruptcy Court approval, the prosecution of any other legal action by creditors or Bondholders of an entity which has sought protection under Chapter 9. Therefore, should the Corporation avail itself of Chapter 9 protection from creditors, the ability to enforce the above-mentioned remedies would be subject to the approval of the Bankruptcy Court (which could require that the action be heard in Bankruptcy Court instead of other federal or state court), and the Bankruptcy Code provides for broad discretionary powers of a Bankruptcy Court in administering any proceeding brought before it. The opinion of Bond Counsel will note that all opinions relative to the enforceability of the Resolution and the Bonds are qualified with respect to the customary rights of debtors relative to their creditors. THE CORPORATION The Corporation is a public instrumentality and non-profit corporation created by and acting on behalf of the City under the authority of the Act. The Corporation is organized for the purpose of benefiting and accomplishing public purposes of the City by promoting, assisting and enhancing the community as it pertains to economic development activities within the City. The Corporation is made up of seven directors, two of whom are members of the City Council and five of whom are residents of the City or residents of Burnet County who live within ten (10) miles of the corporate City limits boundary. The Corporation operates under its Articles of Incorporation (the Articles ), dated August 23, 2007, as well as under the general powers and duties as defined in the Act and the Nonprofit Corporation Act (as defined in the Articles). All voting rights are vested solely in the Board. The Corporation s Bylaws govern the internal affairs of the Corporation and provide the Board meet at such times and places as shall be designated from time to time by the Board, and such meetings are governed by the Texas Open Meetings Act, Chapter 551, Texas Government Code, as amended. The Directors serve without compensation. The fiscal year of the Corporation runs concurrently with the City s fiscal year, beginning the first day of October and ending on the last day of September each year. At least ninety (90) days prior to the commencement of each fiscal year of the Corporation, the Board must adopt a proposed budget of expected revenues and expenditures. The budget does not become effective until the same has been approved by a majority vote of the City Council. All proceeds from the issuance of debt instruments issued by the Corporation shall be deposited and invested as provided in the resolution, order, indenture or other documents authorizing their issuance. All other monies of the Corporation shall be deposited, secured and/or invested in the manner provided for the deposit, security and/or investment of the public funds of the Corporation. The Corporation s financial statements must be audited at least once each fiscal year by an outside independent certified public accounting firm selected by the Corporation and approved by the City Council. Currently, the Corporation does not prepare separate audited financial statements, but its financial information is included as a component unit in the City s annual audited financial statements in accordance with the relevant Government Accounting Standard Board s Statements. Any bonds issued by the Corporation, including the Bonds and any refunding bonds, shall be issued (1) upon approval of the City Council and (2) in accordance with the applicable provisions of the Act that are necessary and appropriate to the fulfillment of the public purposes of the Corporation. The Corporation is prohibited to enter into any loan, lease, trust, or other agreement, the effect of which would grant, convey, transfer, mortgage, encumber, pledge, or assign a security interest or any other interest in any property owned by the City. THE PROJECT The Board published notice and held public hearings on April 2, 2014 and May 7, 2014 on the following projects: Acquisition of real property in the City of Marble Falls, construction of buildings and structures on such property associated with a recreational project for public park, entertainment, or tourist purposes, including related store, restaurant, and concession services, open space improvements, automobile parking facilities and related area transportation facilities, and other related improvements and the maintenance and operation costs for such property and facilities (the Waterfront Project ); and Acquisition of real property in the City of Marble Falls, and construction of buildings on such property associated with a community facility or facilities for tourist, auditorium, and convention purposes, including related store, restaurant, concession and automobile parking facilities and related roads, streets and other related improvements, and the maintenance and operation costs for such property and facilities (the Downtown Project ). The Corporation on June 3, 2014 sold its $4,000,000 Marble Falls Economic Development Corporation Sales Tax Revenue Bond, Taxable Series 2014 to finance and to pay (1) the costs of the acquisition of real property for the Waterfront Project and the Downtown 12

13 Project, (2) planning for the two projects, (3) parking, landscaping, meeting space, boardwalk, trail improvements, open space or park improvements and street improvements related to such projects and (4) the payment of costs of issuance. The Corporation purchased the land for the Waterfront Project and the Downtown Project which are being developed together as a single project. To develop the project, the Corporation is partnering with Novak Cobalt Partners ( NCP ) in the construction of a 150-room select service resort hotel and approximately 16,000 square feet of meeting and restaurant space. The Corporation will contribute $6.5 million to the $26.5 million overall project and ground lease its property to NCP. The hotel and conference center will act as a catalyst for the redevelopment of Downtown Marble Falls by connecting the historic Main Street district to Lake Marble Falls and providing the first substantial capital for the Tax Increment Reinvestment Zone created in The Corporation will use the revenue generated through its ground lease comprised of a base rent amount and performance rent to spur roughly $10 million worth of public real improvements that will be enjoyed by tourists as well as local residents. To develop the Project, the Corporation published notice of public hearing on the Project which it held on November 2, The City also held a public hearing on December 6, The City Council on December 20, 2016 adopted a resolution approving the Project and authorizing the Corporation to issue bonds for the Project. The Corporation adopted its Resolution authorizing the Bonds on December 20, THE CITY The Corporation is reported as if it were a part of the City s operations because it provides services entirely for the City. The City is a market and tourist center located on U.S. Highway 281. The City is located in the middle of the Texas Hill Country on the Colorado River, 47 miles northwest of Austin, Texas, 85 miles north of San Antonio, Texas in the middle of the Highland Lakes area, the largest chain of lakes in Texas. The City is a home rule municipality operating under its home rule charter (the Charter ) since August 9, The City s Home Rule Charter was last amended May 17, The Charter provides that the City will operate under the council/manager form of government pursuant to the laws of the State. The City Manager, appointed by the seven-member elected City Council, is the chief administrative officer of the City. Paying Agent/Registrar REGISTRATION, TRANSFER AND EXCHANGE The initial Paying Agent/Registrar for the Bonds is BOKF, NA, Austin, Texas (the Paying Agent/Registrar ). In the Resolution, the Issuer retains the right to replace the Paying Agent/Registrar. If the paying agent/registrar is replaced by the Issuer, the new paying agent/registrar shall accept the previous Paying Agent/Registrar's records and act in the same capacity as the previous Paying Agent/Registrar. Any successor paying agent/registrar, selected at the sole discretion of the Issuer, shall be a commercial bank, trust company, financial institution or other entity qualified and authorized to serve in such capacity and perform the duties and services of Paying Agent/Registrar. Upon a change in the Paying Agent/Registrar for the Bonds, the Issuer agrees to promptly cause written notice thereof to be sent to each registered owner of the Bonds by United States mail, first-class postage prepaid. The Bonds will be issued in fully registered form in multiples of $5,000 for any one stated maturity, and principal and semiannual interest will be paid by the Paying Agent/Registrar to Cede & Co. Interest on the Bonds is payable by check or draft mailed on or before each interest payment date by the Paying Agent/Registrar to the registered owner at the last known address as it appears on the registration books maintained by the Paying Agent/Registrar on the Record Date (as defined herein) or by such other customary banking arrangement acceptable to the Paying Agent/Registrar and the registered owner to whom interest is to be paid, provided, however, that such person shall bear all risk and expense of such other arrangements. Principal of the Bonds and amounts due at maturity or upon prior redemption will be payable only upon presentation of such Bonds at the designated corporate trust office of the Paying Agent/Registrar at maturity or upon prior redemption; provided, however, that so long as Cede & Co. (or other DTC nominee) is the registered owner of the Bonds, all payments will be made as described under BOOK-ENTRY-ONLY SYSTEM herein. In the event the date for the payment of the principal of or interest on the Bonds shall be a Saturday, Sunday, legal holiday or day when banking institutions located in the city where the Paying Agent/Registrar is located are authorized by law or executive order to close, then the date for such payment shall be the next succeeding day which is not a Saturday, Sunday, legal holiday or day when banking institutions are so authorized to close. Payment on such later day will not increase the amount of interest due and will have the same force and effect as if made on the original date payment was due. Record Date The record date ("Record Date") for interest payable to the registered owner of a Bond on any interest payment date means the fifteenth day of the month next preceding such interest payment date. In the event of a non-payment of interest on a scheduled payment date, and for 30 days thereafter, a new record date for such interest payment (a Special Record Date ) will be established by the Paying Agent/Registrar, if and when funds for the payment of such interest have been received from the Issuer. Notice of the Special Record Date and of the scheduled payment date of the past due interest (the Special Payment Date, which shall be 15 days after the Special Record Date) shall be sent at least five business days prior to the Special Record Date by United States mail, first class postage prepaid, to the address of each registered owner of a Bond appearing on the registration books of the Paying Agent/Registrar at the close of business on the last business day next preceding the date of mailing of such notice. 13

14 Future Registration The Bonds are initially to be issued utilizing the Book-Entry-Only System of DTC. In the event the Bonds are not in the Book-Entry- Only System, Bond certificates will be printed and delivered to the registered owners and thereafter the Bonds may be transferred, registered, and assigned on the registration books of the Paying Agent/Registrar only upon presentation and surrender thereof to the Paying Agent/Registrar, and such registration and transfer shall be without expense or service charge to the registered owner, except for any tax or other governmental charges required to be paid with respect to such registration and transfer. A Bond may be assigned by the execution of an assignment form on the Bond or by other instrument of transfer and assignment acceptable to the Paying Agent/Registrar. A new Bond or Bonds will be delivered by the Paying Agent/Registrar in lieu of the Bonds being transferred or exchanged at the corporate trust office of the Paying Agent/Registrar, or sent by United States registered mail to the new registered owner at the registered owner's request, risk and expense. New Bonds issued in an exchange or transfer of Bonds will be delivered to the registered owner or assignee of the registered owner in not more than three (3) business days after the receipt of the Bonds to be canceled in the exchange or transfer and the written instrument of transfer or request for exchange duly executed by the registered owner or his duly authorized agent, in form satisfactory to the Paying Agent/Registrar. New Bonds registered and delivered in an exchange or transfer shall be in denominations of $5,000 for any one stated maturity or any integral multiple thereof and for a like aggregate principal amount and rate of interest as the Bond or Bonds surrendered for exchange or transfer. (See BOOK-ENTRY-ONLY SYSTEM herein for a description of the system to be utilized in regard to ownership and transferability of the Bonds.) Limitation on Transfer or Exchange of Bonds Neither the Issuer nor the Paying Agent/Registrar shall be required (1) to make any transfer or exchange during a period beginning at the opening of business 15 days before the day of the first mailing of a notice of redemption of bonds and ending at the close of business on the day of such mailing, or (2) to transfer or exchange any Bonds so selected for redemption when such redemption is scheduled to occur within 30 calendar days; provided, however, such limitation shall not be applicable to an exchange by the registered owner of the uncalled principal balance of a Bond called for redemption in part. Replacement Bonds In the Resolution, provision is made for the replacement of mutilated, destroyed, lost, or stolen Bonds upon surrender of the mutilated Bonds to the Paying Agent/Registrar, or the receipt of satisfactory evidence of destruction, loss, or theft, and the receipt by the Issuer and Paying Agent/Registrar of security or indemnity as may be required by either of them to hold them harmless. The Issuer may require payment of taxes, governmental charges, and other expenses in connection with any such replacement. BOOK-ENTRY-ONLY SYSTEM This section describes how ownership of the Bonds is to be transferred and how the principal of, premium, if any, and interest on the Bonds are to be paid to and credited by DTC while the Bonds are registered in its nominee name. The information in this section concerning DTC and the Book-Entry-Only System has been provided by DTC for use in disclosure documents such as this Official Statement. The Corporation, the City, the Financial Advisor and the Underwriter believe the source of such information to be reliable, but take no responsibility for the accuracy or completeness thereof. The Corporation, the City, and the Underwriter cannot and do not give any assurance that (1) DTC will distribute payments of debt service on the Bonds, or other notices given pursuant to the Resolution, to DTC Participants, (2) DTC Participants or others will distribute debt service payments paid to DTC or its nominee (as the registered owner of the Bonds), or notices given pursuant to the Resolution, to the Beneficial Owners, or that they will do so on a timely basis, or (3) DTC will serve and act in the manner described in this Official Statement. The current rules applicable to DTC are on file with the United States Securities and Exchange Commission, and the current procedures of DTC to be followed in dealing with DTC Participants are on file with DTC. DTC will act as securities depository for the Bonds. The Bonds will be issued as fully registered securities registered in the name of Cede & Co. (DTC s partnership nominee) or such other name as may be requested by an authorized representative of DTC. One fully registered Bond certificate, in the aggregate principal amount of each maturity of the Bonds, will be issued and deposited with DTC. DTC, the world s largest depository, is a limited-purpose trust company organized under the New York Banking Law, a banking organization within the meaning of the New York Banking Law, a member of the Federal Reserve System, a clearing corporation within the meaning of the New York Uniform Commercial Code, and a clearing agency registered pursuant to the provisions of Section 17A of the Securities Exchange Act of DTC holds and provides asset servicing for over 3.5 million issues of U.S. and non-u.s. equity, corporate and municipal debt issues, and money market instruments (from over 100 countries) that DTC s participants ( Direct Participants ) deposit with DTC. DTC also facilitates the post-trade settlement among Direct Participants of sales and other securities transactions in deposited securities through electronic computerized book-entry transfers and pledges between Direct Participants accounts. This eliminates the need for physical movement of securities certificates. Direct Participants include both U.S. and non-u.s. securities brokers and dealers, banks, trust companies, clearing corporations, and certain other organizations. DTC is a wholly-owned subsidiary of The Depository Trust & Clearing Corporation ( DTCC ). DTCC is the holding company for DTC, National Securities Clearing Corporation, and Fixed Income Clearing Corporation, all of which are registered clearing agencies. DTCC is owned by the users of its regulated subsidiaries. Access to the DTC system is also available to others such as both U.S. and non-u.s. securities brokers and dealers, banks, trust companies, and clearing corporations that clear through or maintain a custodial relationship with a Direct Participant, either directly or indirectly ( Indirect Participants ). Direct Participants and Indirect Participants are referred to collectively as Participants. DTC has a Standard & Poor s rating of AA+. The DTC Rules applicable to its Participants are on file with the United States Securities and Exchange Commission. More information about DTC can be found at 14

15 Purchases of Bonds under the DTC system must be made by or through Direct Participants, which will receive a credit for the Bonds on DTC s records. The ownership interest of each actual purchaser of each Bond ( Beneficial Owner ) is in turn to be recorded on the Participants records. Beneficial Owners will not receive written confirmation from DTC of their purchase. Beneficial Owners are, however, expected to receive written confirmations providing details of the transaction, as well as periodic statements of their holdings, from the Participant through which the Beneficial Owner entered into the transaction. Transfers of ownership interests in the Bonds are to be accomplished by entries made on the books of Participants acting on behalf of Beneficial Owners. Beneficial Owners will not receive certificates representing their ownership interests in Bonds, except in the event that use of the book-entry system for the Bonds is discontinued. To facilitate subsequent transfers, all Bonds deposited by Direct Participants with DTC are registered in the name of DTC s partnership nominee, Cede & Co., or such other name as may be requested by an authorized representative of DTC. The deposit of Bonds with DTC and their registration in the name of Cede & Co. or such other DTC nominee do not effect any change in beneficial ownership. DTC has no knowledge of the actual Beneficial Owners of the Bonds; DTC s records reflect only the identity of the Direct Participants to whose accounts such Bonds are credited, which may or may not be the Beneficial Owners. The Participants will remain responsible for keeping account of their holdings on behalf of their customers. Conveyance of notices and other communications by DTC to Direct Participants, by Direct Participants to Indirect Participants, and by Direct Participants and Indirect Participants to Beneficial Owners will be governed by arrangements among them, subject to any statutory or regulatory requirements as may be in effect from time to time. Beneficial Owners of Bonds may wish to take certain steps to augment the transmission to them of notices of significant events with respect to the Bonds, such as redemptions, tenders, defaults, and proposed amendments to the Bond documents. For example, Beneficial Owners of Bonds may wish to ascertain that the nominee holding the Bonds for their benefit has agreed to obtain and transmit notices to Beneficial Owners. In the alternative, Beneficial Owners may wish to provide their names and addresses to the registrar and request that copies of notices be provided directly to them. Redemption notices shall be sent to DTC. If less than all of the Bonds within a maturity are being redeemed, DTC s practice is to determine by lot the amount of interest of each Direct Participant in such maturity to be redeemed. Neither DTC nor Cede & Co. (nor any other DTC nominee) will consent or vote with respect to Bonds unless authorized by a Direct Participant in accordance with DTC s Procedures. Under its usual procedures, DTC mails an Omnibus Proxy to the Corporation as soon as possible after the Record Date. The Omnibus Proxy assigns Cede & Co. s consenting or voting rights to those Direct Participants to whose accounts Bonds are credited on the Record Date (identified in a listing attached to the Omnibus Proxy). All payments on the Bonds will be made to Cede & Co., or such other nominee as may be requested by an authorized representative of DTC. DTC s practice is to credit Direct Participants accounts upon DTC s receipt of funds and corresponding detail information from the Corporation or the Paying Agent/Registrar, on the payable date in accordance with their respective holdings shown on DTC s records. Payments by Participants to Beneficial Owners will be governed by standing instructions and customary practices, as is the case with securities held for the accounts of customers in bearer form or registered in street name, and will be the responsibility of such Participant and not of DTC nor its nominee, the Paying Agent/Registrar, or the Corporation, subject to any statutory or regulatory requirements as may be in effect from time to time. All payments on the Bonds to Cede & Co. (or such other nominee as may be requested by an authorized representative of DTC) is the responsibility of the Corporation or the Paying Agent/Registrar, disbursement of such payments to Direct Participants will be the responsibility of DTC, and disbursement of such payments to the Beneficial Owners will be the responsibility of Participants. DTC may discontinue providing its services as depository with respect to the Bonds at any time by giving reasonable notice to the Corporation or Paying Agent/Registrar. Under such circumstances, in the event that a successor depository is not obtained, Bond certificates are required to be printed and delivered. The Issuer may decide to discontinue use of the system of book-entry only transfers through DTC (or a successor securities depository). In that event, Bond certificates will be printed and delivered. (See "REGISTRATION, TRANSFER, AND EXCHANGE" herein.) The information in this section concerning DTC and DTC s book-entry system has been obtained from sources that the Issuer believes to be reliable, but none of the Issuer, the City, or the Underwriter take responsibility for the accuracy thereof. Use of Certain Terms in Other Sections of this Official Statement In reading this Official Statement it should be understood that while the Bonds are in the Book-Entry-Only System, references in other sections of this Official Statement to registered owners should be read to include the person for which the Participant acquires an interest in the Bonds, but (i) all rights of ownership must be exercised through DTC and the Book-Entry-Only System, and (ii) except as described above, notices that are to be given to registered owners under the Resolution will be given only to DTC. Pledge Under the Resolution SECURITY FOR THE BONDS In the Resolution, the Corporation covenants and agrees that the Pledged Revenues, with the exception of those in excess of the amounts required for the payment and security of the Bonds and any Additional Parity Obligations (together, the Parity Obligations ), are irrevocably pledged to the payments of and security for the Parity Obligations, including the establishment and maintenance of the special funds created and established in the Resolution and any resolutions authorizing Additional Parity Obligations. Under the Resolution, the Pledged Revenues consist of (i) the Gross Sales Tax Revenues (defined below) from time to time deposited or owing to the Pledged Revenue Fund (defined below), and (ii) such other money, income, revenues, receipts or other property which the Corporation may expressly and specifically pledge to the payment of Parity Obligations. The Resolution defines Gross Sales Tax Revenues as all of the revenues or receipts due or owing to, or collected or received by or on behalf of the Corporation by the City or otherwise from the Sales Tax (defined below), less any amounts due and owed to the 15

16 Comptroller of Public Accounts of the State of Texas as charges for the collection of the Sales Tax or retention by the Comptroller for refunds and to redeem dishonored checks and drafts, to the extent such charges and retention are authorized or required by law. The Resolution defines Sales Tax as the local sales and use tax authorized under the Act, approved at an election held on May 12, 2007, at a rate of one-half of one percent (1/2%), and levied by the City on behalf of the Corporation. UNDER THE RESOLUTION, THE BONDS AND ANY ADDITIONAL PARITY OBLIGATIONS, INCLUDING INTEREST PAYABLE THEREON, CONSTITUTE OBLIGATIONS OF THE CORPORATION, PAYABLE SOLELY FROM, AND SECURED BY A LIEN ON AND PLEDGE OF THE PLEDGED REVENUES AND NOT FROM ANY OTHER REVENUES, PROPERTIES OR INCOME OF THE CORPORATION. THE BONDS DO NOT CONSTITUTE A DEBT OR OBLIGATION OF THE STATE OF TEXAS, OR OF THE CITY, BURNET COUNTY OR ANY AGENCY, POLITICAL CORPORATION OR SUBDIVISION THEREOF. NEITHER THE FULL FAITH AND CREDIT OF THE ISSUER, THE STATE, BURNET COUNTY, THE CITY NOR ANY OTHER AGENCY, POLITICAL CORPORATION OR SUBDIVISION OF THE STATE HAS BEEN PLEDGED FOR THE PAYMENT OF THE BONDS, EXCEPT AS DESCRIBED HEREIN. The Pledged Revenue Fund Under the terms of the Act and a resolution adopted by the City Council of the City (the "Sales Tax Collection Resolution") that relates to the collection, handling and transfer of sales tax revenue due to the Corporation (which was reaffirmed by City residents pursuant to an election), the pledged Sales Tax revenues are collected by the State Comptroller of Public Accounts and remitted periodically to the City for the benefit of the Corporation shall be deposited by the City as received to the credit of a fund or account of the Corporation to be known as the "Pledged Revenue Fund." As explained below under "SECURITY FOR THE BONDS - Flow of Funds," the Gross Sales Tax Revenues held in the Pledged Revenue Fund are first to be used to make payments to the Bond Fund in amounts equal to one hundred percent (100%) of the interest on and principal of the Parity Obligations then due and payable. General Covenant Regarding the Sales Tax The Municipal Sales and Use Tax Act (Chapter 321, Texas Tax Code, as amended) provides that the Sales Tax does not apply to the sale of a taxable item unless the item is also taxable under the Texas Limited Sales, Excise and Use Tax Act (Chapter 151, Texas Tax Code, as amended). The Sales Tax is therefore subject to broadening and reduction in the base against which it is levied by action of the State Legislature without the consent of the City or the Corporation. (See THE SALES TAX Investor Considerations herein.) In the Resolution, the Corporation covenants and agrees that, while any Bonds are outstanding, it will take all legal means and actions permissible to cause the Sales Tax, at its current rate (1/2 of 1%), to be levied and collected continuously throughout the boundaries of the City, as such boundaries may be changed from time to time, in the manner and to the maximum extent legally permitted and to cause no reduction, abatement or exemption in the Sales Tax until all the Bonds have been paid in full or until they are lawfully defeased in accordance with the Resolution. The Corporation also covenants and agrees that if, subsequent to the issuance of the Bonds, the City is authorized by applicable law to impose and levy the Sales Tax on any items or transactions that are not subject to the Sales Tax on the date the Resolution was adopted, then the Corporation will use its best efforts to cause the City to take such action as may be required by applicable law to subject such items or transactions to the Sales Tax. Flow of Funds All Pledged Revenues shall be deposited and transferred as received to the Pledged Revenue Fund. Moneys deposited in the Pledged Revenue Fund shall be pledged and appropriated to the following uses, in the order of priority shown: First. To the payment, without priority, of all amounts required to be deposited into the Bond Fund for the payment of Debt Service on the Parity Obligations, as they become due and payable; Second. To the payment of the amounts required to be deposited in the Reserve Fund, as further described below, to establish and maintain the Required Reserve (defined herein) and any reserve fund surety policy, in accordance with the provisions of the Resolution and any Supplemental Resolution; Third. To the payment of the amounts required to be deposited in any other fund or account required by any Supplemental Resolution authorizing the issuance of Parity Obligations; and Fourth. To any fund or account held at any place or places, or to any payee, required by any other resolution of the Board authorizing the issuance of obligations or the creation of debt of the Issuer having a lien on the Pledged Revenues subordinate to the lien created in the Resolution for benefit of the Parity Obligations. Reserve Fund Requirements The Resolution requires the Corporation to establish and maintain the Reserve Fund for the Parity Obligations (including the Bonds) in the event funds on deposit in the Bond Fund are insufficient for such purpose. The Corporation shall deposit and credit to the Reserve Fund amounts required to maintain the balance in the Reserve Fund in an amount equal to the average annual debt service requirements of the outstanding Parity Obligations (the Required Reserve ). The average annual debt service requirements of the Bonds shall be calculated by the Corporation on the date of issuance of the Bonds and on each October 1 thereafter, and the Required Reserve to be maintained in the Reserve Fund after each such calculation shall be the amount determined by such calculation. When 16

17 and for so long as the cash, investments and reserve fund surety policy in the Reserve Fund equal the Required Reserve, no deposits need be made to the credit of the Reserve Fund. If the Reserve Fund at any time contains less than the Required Reserve, the Corporation covenants and agrees that the Corporation shall cure the deficiency in the Reserve Fund by making deposits to such Fund from the Pledged Revenues, in the order of priority described above, by monthly deposits and credits in amounts equal to not less than 1/60th of the Required Reserve with any such deficiency payments being made on or before the last day of each month until the Required Reserve has been fully restored; provided, however, that no such deposits shall be made into the Reserve Fund during any six-month period beginning on August 1 and February 1 until there has been deposited into the Bond Fund the full amount required to be deposited therein by the next following August 1 and February 1, as the case may be. In addition, in the event that a portion of the Required Reserve is represented by a reserve fund surety policy (see Surety Policy below), the Required Reserve and deposits to the Reserve Fund shall take into account such value of the reserve fund surety policy. The Corporation has further covenanted and agreed that, subject only to the prior deposits and credits to be made to the Bond Fund, the Pledged Revenues shall be applied, appropriated and used to establish and maintain the Required Reserve, including by paying payments under a reserve fund surety policy when due, and any reserve established for the benefit of any issue or series of Additional Parity Obligations and to cure any deficiency in such amounts as required by the terms of this Resolution and any other resolution pertaining to the issuance of Additional Parity Obligations. Notwithstanding anything to the contrary contained in the Resolution, as herein described, the requirements described above to fund the Reserve Fund in the amount of the Required Reserve shall be suspended for such time as the Pledged Revenues for each fiscal year are equal to at least 110% of the average annual debt service requirements. In the event that the Pledged Revenues for any two consecutive Fiscal Years are less than 110% (unless such percentage is below 100% of the average annual debt service requirements in any fiscal year, in which case the herein specified requirements to restore the Required Reserve will commence after such fiscal year) of the average annual debt service requirements, the Corporation will be required to commence making the deposits to fund the Reserve Fund as provided above, and to continue making such deposits until the earlier of (i) such time as the Reserve Fund contains the Required Reserve or (ii) the Pledged Revenues for a fiscal year have been equal to not less than 110% of the average annual debt service requirements. Surety Policy In the Resolution the Corporation has retained the option, to be exercised at its discretion in the future, to fund all or part of the Required Reserve by purchasing an insurance policy that will unconditionally obligate the insurance company or other entity to pay all, or any part thereof, of the Required Reserve in the event funds on deposit in the referenced account are not sufficient to pay the debt service requirements on the Parity Obligations. In the event an insurance policy issued to satisfy all or part of the Corporation s obligation with respect to the Required Reserve causes the amount then on deposit in the Required Reserve to exceed the Required Reserve, the Corporation may transfer such excess amount to any fund or account established for the payment of or security for the Parity Obligations or use such excess amount for any lawful purpose now or hereafter provided by law; provided, however, to the extent that such excess amount represents bond proceeds, then such amount must be used to satisfy the Required Reserve. No representation is hereby made that the Corporation will use such surety policy. Additional Parity Obligations In addition to the right to issue obligations of inferior lien (as further described in the Resolution), the Corporation reserves the right to issue Additional Parity Obligations which, when duly authorized and issued in compliance with law and the terms and conditions hereinafter appearing, shall be on a parity with the Bonds herein authorized, payable from and equally and ratably secured by a lien on and pledge of the Pledged Revenues and the Bonds and Additional Parity Obligations shall in all respects be of equal dignity. The Additional Parity Obligations may be issued in one or more installments, provided, however, that none shall be issued unless and until the following conditions have been met: (i) The Corporation is not then in default as to any covenant, condition or obligation prescribed in a resolution authorizing the issuance of the outstanding Parity Obligations, as attested to in a certificate of the Corporation s Treasurer. (ii) Each of the funds created for the payment, security and benefit of the Parity Obligations including the Required Reserve as attested to in a certificate of the Corporation s Treasurer contains the amount of money then required to be on deposit therein. (iii) The Corporation has secured from a certified public accountant a certificate or report reflecting that for the most recently available audited financial statements for the fiscal year next preceding the dated date of the proposed Additional Parity Obligations, or a consecutive twelve (12) month period out of the eighteen (18) month period next preceding the month in which the resolution authorizing the proposed Additional Parity Obligations is adopted, the Gross Sales Tax Revenues were equal to at least 1.50 times the combined maximum annual principal and interest requirements on all Parity Obligations to be outstanding after the issuance of the proposed Additional Parity Obligations; provided, that, in the event of an increase in the rate of the Sales Tax that becomes effective prior to the date of the resolution authorizing the issuance of the Additional Parity Obligations, such certificate or report shall calculate the Gross Sales Tax Revenues for the calculation period as if such increased rate were in effect during such period. (iv) The Additional Parity Obligations are made to mature on an interest payment date of each year in which they are scheduled to mature. (v) The resolution authorizing the Additional Parity Obligations provides that: (i) the Bond Fund be augmented by amounts adequate to accumulate the sum required to pay the principal and interest on such obligations as the same shall become due; and (ii) the amount to be maintained in the Reserve Fund shall be increased to an amount not less than the Required Reserve calculated to include the debt service of the proposed additional obligations; and (iii) any additional amount required to be maintained in the 17

18 Reserve Fund shall be deposited therein upon delivery of such Additional Parity Obligations or in not more than sixty (60) months from such date. THE RESOLUTION DOES NOT PROVIDE FOR THE ACCELERATION OF THE BONDS IN THE EVENT OF A DEFAULT. (See APPENDIX D - SELECTED PROVISIONS OF THE RESOLUTION herein.) THE SALES TAX The Sales Tax is a ½ of 1% limited sales and use tax imposed on all taxable transactions within the City as approved at an election held by and within the City on May 12, The Texas Tax Code prohibits a municipality from increasing its sales and use tax or adopting an additional sales and use tax if, as a result of such adoption or increase, the combined rate of all sales and use taxes imposed by the municipality and all other political subdivisions of the State having territory in the municipality would exceed two percent (2%) at any location in the municipality. The total rate of all State (6¼%) and local (2%) sales and use taxes levied in the City is currently 8¼%. The Sales Tax is authorized to be levied and collected against the receipts from the sale at retail of taxable items within the City. The Sales Tax also is an excise tax on the use, storage or other consumption of taxable tangible personal property purchased, leased or rented from a retailer within the City. The imposition, computation, administration, governance, abolition and use of the Sales Tax is governed by the Texas Limited Sales, Excise, and Use Tax Act except to the extent that there is conflict with the Act, in which case the provisions of the Act control as to the Bonds, and by the Municipal Sales and Use Tax Act, and reference is made thereto for a more complete description of the Sales Tax. In general, as applied to the Sales Tax, a taxable item includes any tangible personal property and certain taxable services. "Taxable services" include certain amusement services, personal services, cable television services, motor vehicle parking and storage services, the repair, remodel, maintenance and restoration of most tangible personal property, certain telecommunication services, credit reporting services, debt collection services, insurance services, information services, real property services, data processing services, real property repair and remodeling, security services, telephone answering services, Internet access services, and distribution utility of transmission or delivery of service directly to an electricity end-use customer whose consumption of electricity is subject to taxation under Chapter 151 of the Texas Tax Code. Many items are exempted by State law from sales and use taxes, including items purchased for resale, food products (except food products which are sold for immediate consumption, e.g., by restaurants, lunch counters, etc.), health care supplies (including prescription medicines, corrective lens and various therapeutic appliances and devices), agricultural items (if the item is to be used exclusively on a farm or ranch or in the production of agricultural products), gas and electricity purchased for residential use (unless a city has taken steps to repeal the exemption), certain telecommunications services, newspapers and magazines. In addition, items which are taxed under other State laws are generally exempted from sales taxes. These items include certain natural resources, cement, motor vehicles, and insurance premiums. Alcohol and tobacco products are taxed under both State alcohol and tobacco taxes as well as through the sales taxes except that the following are exempt from the sales taxes: mixed beverages, ice or nonalcoholic beverages that are subject to State alcohol taxes (there is no local component of the State alcohol taxes and, thus, the City would not receive any revenue with respect to such sales) and alcoholic beverages when sold to the holder of a private club registration permit under certain circumstances. In addition, purchases made by various exempt organizations are not subject to the sales and use taxes. Such organizations include the federal and state governments, political subdivisions, Indian tribes, religious institutions and certain charitable organizations and non-profit corporations, senior citizen organizations, and university and college student organizations. Also, State law provides an exemption from sales taxes on items purchased under a certain bids or written contracts in effect when the legislation authorizing such tax (or the increase in the rate thereof) is enacted, up to a maximum of three years. In general, a sale of a taxable item is deemed to occur within the municipality in which the sale is consummated. The tax levied on the use, storage or consumption of tangible personal property is considered to be consummated at the location where the item is first stored, used or consumed. Thus, the use is considered to be consummated in a municipality, and the tax is levied there if the item is shipped from outside the state to a point within the municipality. In addition to the local sales and use taxes levied, as described above, the State levies and collects a 6 ¼% sales and use tax against essentially the same taxable items and transactions as the Sales Tax is levied. Under current State law, the maximum aggregate sales and use tax which may be levied within a given area by an authorized political subdivision within such area is 8¼% (within the City, 6¼% is levied by the State, 1% is levied by the City for its general use, ½ of 1% for property tax relief and ½ of 1% is levied for the benefit of the Corporation). The Comptroller administers and enforces all sales tax laws and collects all sales and use taxes levied by the State, and levying counties, municipalities and other special districts having sales tax powers. Certain limited items are taxed for the benefit of the State under sales tax statutes, such as certain natural resources and other items described above, and are not subject to the sales tax base available to municipalities and counties, including the tax base against which the Sales Tax is levied. Municipalities may by local option determine to tax certain telecommunication services on the same basis as the State taxes such services (some aspects of telecommunication services, such as interstate telephone calls and broadcasts regulated by the FCC are not subject to either State or local taxation). With respect to the taxation of the residential use of gas and electricity, the State is not authorized to collect a sales tax, while municipalities, on a local option basis, may tax such use. The City does not tax the residential use of gas and electricity. 18

19 In recent years, several changes in the State sales tax laws have contributed to the growth of local sales tax revenues. These changes have added additional goods and services to the list of taxable items. Other items have been subjected to sales tax on an interim basis or have been taxed pursuant to legislation which includes planned phase-outs of the tax, including sales tax for tangible personal property used in manufacturing, processing, or fabrication operations with a useful life of at least six months that became totally exempt from sales tax in Subject to the right of the governing body of the City to repeal the sales tax holiday, during a three day period beginning the Friday before eight days prior to the earliest possible first day of school, articles of clothing, footwear, qualifying backpacks and school supplies with a cost less than $100 are exempt from the sales tax as is 20% of the value of information services and data processing services. The first $25 of a monthly charge for Internet access is exempt from sales tax (see however THE SALES TAX Investor Considerations herein for a description of the state of sales taxation on Internet access), as is 20% of the value of information services and data processing services. Sales tax is due on over-the-counter drugs and medicines labeled with a national FDA drug code. With certain exceptions, sales and use taxes in the State are collected at the point of sale and are remitted to the Comptroller by the "taxpayer" who is, generally speaking, the business that collects the tax resulting from a taxable transaction. Taxpayers owing $500 or more sales and use tax dollars in a calendar month submit their tax collections to the Comptroller on a monthly basis; taxpayers owing less than $500 sales and use tax dollars in a calendar month or less than $1,500 in a calendar quarter submit their tax collections quarterly; and taxpayers owing less than $1,500 in a calendar quarter submit their tax collections annually. Taxpayers are required to report and remit to the Comptroller by the 20th day of the month following the end of the reporting period. The reporting period for yearly filers ends each December 31; for quarterly filers, the reporting period ends at the end of each calendar quarter; and monthly filers report and remit by the 20th of each month for the previous month. The Comptroller is required by law to distribute funds to the receiving political subdivisions periodically and as promptly as feasible but not less frequently than twice during each fiscal year of the State. Historically, and at the present time, the Comptroller distributes the funds monthly with the largest payments being made quarterly in February, May, August and November. The Comptroller has initiated a direct deposit program using electronic funds transfers to expedite the distribution of monthly allocation checks. If a political subdivision desires to participate in the electronic funds transfers, it may make application to the Comptroller. The City does participate in this program. Otherwise, the Comptroller mails the monthly allocation check which is typically received by the middle of the month following the month in which the taxpayer reports and remits payment on the tax. The Comptroller is responsible for enforcing the collection of sales and use taxes in the State. Under State law, the Comptroller utilizes sales tax permits, sales tax bonds and audits to encourage timely payment of sales and use taxes. Each entity selling, renting, leasing or otherwise providing taxable goods or services is required to have a sales tax permit. Permits are required for each individual location of a taxpayer and are valid for only one year, requiring an annual renewal. As a general rule, every person who applies for a sales tax permit for the first time, or who becomes delinquent in paying the sales or use tax, is required to post a bond in an amount sufficient to protect against the failure to pay taxes. The Comptroller s audit procedures include auditing the largest 2% of the sales and use tax taxpayers (who report about 65% of all sales and use tax in the State annually), each every three or four years. Other taxpayers are selected at random or upon some other basis for audits. The Comptroller also engages in taxpayer education programs and mails a report to each taxpayer before the last day of the month, quarter or year that it covers. Once a taxpayer becomes delinquent in the payment of a sales or use tax, the Comptroller may collect the delinquent tax by using one or more of the following methods; (i) collection by an automated collection center or local field office, (ii) estimating the taxpayer s liability based on the highest amount due in the previous 12 months and billing them for it, (iii) filing liens and requiring a new or increased payment bond, (iv) utilizing forced collection procedures such as seizing assets of the taxpayer (e.g., a checking account) or freezing assets of the taxpayer that are in the custody of third parties, (v) removing a taxpayer s sales and use tax permit, and (vi) certifying the account to the Attorney General s Office to file suit for collection. A municipality may not sue for delinquent taxes unless it joins the Attorney General as a plaintiff or unless it first receives the permission of the Attorney General and the Comptroller. The Comptroller retains 2% of the tax receipts for collection of the tax; additionally, under State law, a taxpayer may deduct and withhold ½% of the amount of taxes due on a timely return as reimbursement for the cost of collecting the sales and use taxes. In addition, a taxpayer who prepays its tax liability on the basis of a reasonable estimate of the tax liability for a month or quarter in which a prepayment is made, may deduct and withhold 1¼% of the amount of the prepayment in addition of the ½% allowed for the cost of collecting the sales and use tax. Investor Considerations Sales Tax Volatility and Potential Changes in Sales Tax Base. The source primary of security for the Bonds will be receipts of the Sales Tax received by the City for the benefit of the Corporation. The amount of the revenues from the Sales Tax is closely related to the amount of economic activity in the City. Sales and use tax receipts, unlike other taxes levied by municipalities, immediately reflect changes in the economic conditions of a municipality. Increases in Internet sales may result in a decrease in Sales Tax revenue to the Corporation. The emergence of Internet sales and services and issues related to taxation of such sales and services have been the subject of review and study at the state and national level. In October 1998, the United States Congress enacted the Internet Tax Freedom Act which provided a three year moratorium on certain aspects of taxation of the Internet (existing taxes imposed by Texas were exempted from the moratorium). Congress extended the moratorium for additional three-year terms in 2001 and In October 2007, Congress extended the moratorium for an additional seven years through On June 9, 2015, the United States House of Representatives voted and approved by voice vote the Permanent Internet Tax Freedom Act (the PITFA ) which would ban state and local Internet access taxation. The United States Senate never took action on the PITFA. The relevant provisions of the PITFA were added to Section 922 of the Trade Facilitation and Trade Enforcement Act (the Trade Act ), signed into law by President Obama on February 24, The Trade Act bans Internet access taxes and imposes a firm end date on those states still imposing the tax. However, the Trade Act did not resolve the issue of whether a local government may impose sales taxes on online purchases. Legislative changes relating to the taxation of Internet sales and services, and any effect of such changes on the Sales Tax received by the Corporation, cannot be predicted at this time. 19

20 Historically, the Comptroller has remitted sales and use tax allocation checks to municipalities on a monthly basis, but State law currently requires that such allocation be made at least twice annually and such procedures could change in the future. Additionally, the taxable items and services subject to State and local sales and use taxes are subject to legislative action, and have been changed in recent years by the State Legislature. State law provides that the Sales Tax cannot be levied against any taxable item or service unless such item or service is also subject to the State sales and use tax. In recent years the State Legislature has enacted laws permitting the State, together with its political subdivisions, to levy sales and use taxes of up to 8¼%, which is among the highest sales tax rates in the nation (although the State has no personal or corporate income tax), and the current total sales and use tax rate within the City's boundaries is 8¼% (including 6 ¼% State sales tax, 1% for the City s general use, ½ of 1% for property tax relief, and ½ of 1% for the benefit of the Corporation). The rate of the sales and use taxes authorized in the State could be further increased by the State Legislature and the Corporation has no way of predicting any such increase or the effect that would have on the Sales Tax which will secure the Bonds. State leaders have appointed committees to study methods of achieving greater tax equity within the State's tax system. Any changes which may be enacted by the State Legislature could affect the tax base against which the Sales Tax is levied, and the City (and hence the Corporation, as the beneficiary of the City's action), except in certain limited instances described below, has no control over the components of the tax base. Neither the City nor the Corporation currently has statutory authority to increase or decrease the maximum authorized rate of the Sales Tax. Tax receipts received by the Corporation are expected to be subject to seasonal variations and to variations caused by the State laws and administrative practices governing the remittance of sales and use tax receipts which authorize different taxpayers to remit the tax receipts at different times throughout the year. (See Table 5 SALES TAX COLLECTIONS MARBLE FALLS EDC and Table 6 SALES TAX COLLECTIONS CITY OF MARBLE FALLS, TEXAS in APPENDIX A for more detail on actual sales and use tax collections over the past few years). The Sales Tax is collected by the Comptroller and remitted to the City along with other City sales and use tax receipts. The City allocates a portion of the receipts to the Corporation which represents the ½ of 1% tax rate of the Sales Tax. Generally, sales and use taxes in the State are collected at the point of a taxable transaction and remitted by the taxpayer to the Comptroller. The Comptroller has the primary responsibility for enforcing sales and use tax laws and collecting delinquent taxes. The collection efforts of the Comptroller are subject to applicable federal bankruptcy code provisions with respect to the protection of debtors. Changes in the tax base against which a sales and use tax is assessed, as well as changes in the rate of such taxes, make projection of future tax revenue collections very difficult. No independent projections have been made with respect to the revenues available to pay debt service on the Bonds. Historical information regarding the State's sales tax base, gross sales within the City, and sales within the City which are subject to the State sales and use tax is included herein, and while the Corporation has no reason to expect that receipts of the Sales Tax will ever be insufficient to pay its outstanding Sales Tax secured debt, it makes no representation that, over the term of the Bonds, sales and services within the City will provide sufficient Sales Tax receipts to pay the Bonds and Additional Parity Obligations, if any. (See Table 5 SALES TAX COLLECTIONS MARBLE FALLS EDC in APPENDIX A hereto.) BOND INSURANCE POLICY BOND INSURANCE Concurrently with the issuance of the Bonds, Build America Mutual Assurance Company ( BAM ) will issue its Municipal Bond Insurance Policy for the Bonds (the Policy ). The Policy guarantees the scheduled payment of principal of and interest on the Bonds when due as set forth in the form of the Policy included as an Appendix to this Official Statement. The Policy is not covered by any insurance security or guaranty fund established under New York, California, Connecticut or Florida insurance law. BUILD AMERICA MUTUAL ASSURANCE COMPANY BAM is a New York domiciled mutual insurance corporation. BAM provides credit enhancement products solely to issuers in the U.S. public finance markets. BAM will only insure obligations of states, political subdivisions, integral parts of states or political subdivisions or entities otherwise eligible for the exclusion of income under section 115 of the U.S. Internal Revenue Code of 1986, as amended. No member of BAM is liable for the obligations of BAM. The address of the principal executive offices of BAM is: 200 Liberty Street, 27th Floor, New York, New York 10281, its telephone number is: , and its website is located at: BAM is licensed and subject to regulation as a financial guaranty insurance corporation under the laws of the State of New York and in particular Articles 41 and 69 of the New York Insurance Law. BAM s financial strength is rated AA/Stable by S&P Global Ratings, a business unit of Standard & Poor's Financial Services LLC ( S&P ). An explanation of the significance of the rating and current reports may be obtained from S&P at The rating of BAM should be evaluated independently. The rating reflects the S&P s current assessment of the creditworthiness of BAM and its ability to pay claims on its policies of insurance. The above rating is not a recommendation to buy, sell or hold the Bonds, and such rating is subject to revision or withdrawal at any time by S&P, including withdrawal initiated at 20

21 the request of BAM in its sole discretion. Any downward revision or withdrawal of the above rating may have an adverse effect on the market price of the Bonds. BAM only guarantees scheduled principal and scheduled interest payments payable by the issuer of the Bonds on the date(s) when such amounts were initially scheduled to become due and payable (subject to and in accordance with the terms of the Policy), and BAM does not guarantee the market price or liquidity of the Bonds, nor does it guarantee that the rating on the Bonds will not be revised or withdrawn. Capitalization of BAM BAM s total admitted assets, total liabilities, and total capital and surplus, as of September 30, 2016 and as prepared in accordance with statutory accounting practices prescribed or permitted by the New York State Department of Financial Services were $493.9 million, $61.0 million and $432.8 million, respectively. BAM is party to a first loss reinsurance treaty that provides first loss protection up to a maximum of 15% of the par amount outstanding for each policy issued by BAM, subject to certain limitations and restrictions. BAM s most recent Statutory Annual Statement, which has been filed with the New York State Insurance Department and posted on BAM s website at is incorporated herein by reference and may be obtained, without charge, upon request to BAM at its address provided above (Attention: Finance Department). Future financial statements will similarly be made available when published. BAM makes no representation regarding the Bonds or the advisability of investing in the Bonds. In addition, BAM has not independently verified, makes no representation regarding, and does not accept any responsibility for the accuracy or completeness of this Official Statement or any information or disclosure contained herein, or omitted herefrom, other than with respect to the accuracy of the information regarding BAM, supplied by BAM and presented under the heading BOND INSURANCE. Additional Information Available from BAM Credit Insights Videos. For certain BAM-insured issues, BAM produces and posts a brief Credit Insights video that provides a discussion of the obligor and some of the key factors BAM s analysts and credit committee considered when approving the credit for insurance. The Credit Insights videos are easily accessible on BAM's website at buildamerica.com/creditinsights/. (The preceding website address is provided for convenience of reference only. Information available at such address is not incorporated herein by reference.) Credit Profiles. Prior to the pricing of bonds that BAM has been selected to insure, BAM may prepare a pre-sale Credit Profile for those bonds. These pre-sale Credit Profiles provide information about the sector designation (e.g. general obligation, sales tax); a preliminary summary of financial information and key ratios; and demographic and economic data relevant to the obligor, if available. Subsequent to closing, for any offering that includes bonds insured by BAM, any pre-sale Credit Profile will be updated and superseded by a final Credit Profile to include information about the gross par insured by CUSIP, maturity and coupon. BAM pre-sale and final Credit Profiles are easily accessible on BAM's website at buildamerica.com/obligor/. BAM will produce a Credit Profile for all bonds insured by BAM, whether or not a pre-sale Credit Profile has been prepared for such bonds. (The preceding website address is provided for convenience of reference only. Information available at such address is not incorporated herein by reference.) Disclaimers. The Credit Profiles and the Credit Insights videos and the information contained therein are not recommendations to purchase, hold or sell securities or to make any investment decisions. Credit-related and other analyses and statements in the Credit Profiles and the Credit Insights videos are statements of opinion as of the date expressed, and BAM assumes no responsibility to update the content of such material. The Credit Profiles and Credit Insight videos are prepared by BAM; they have not been reviewed or approved by the issuer of or the underwriter for the Bonds, and the issuer and underwriter assume no responsibility for their content. BAM receives compensation (an insurance premium) for the insurance that it is providing with respect to the Bonds. Neither BAM nor any affiliate of BAM has purchased, or committed to purchase, any of the Bonds, whether at the initial offering or otherwise. BOND INSURANCE RISK FACTORS In the event of default of the payment of principal or interest with respect to the Bonds when all or some becomes due, any owner of the Bonds shall have a claim under the Policy for such payments. The payment of principal and interest in connection with mandatory or optional prepayment of the Bonds by the Corporation which is recovered by the Corporation from the Bond owner as a voidable preference under applicable bankruptcy law may be covered by the Policy, however, such payments will be made by BAM at such time and in such amounts as would have been due absence such prepayment by the Corporation unless BAM chooses to pay such amounts at an earlier date. Payment of principal and interest is not subject to acceleration, but other legal remedies upon the occurrence of non-payment do exist. See THE BONDS Bondholders Remedies. BAM may reserve the right to direct and may require consent to any remedies that the Paying Agent/Registrar exercises and the Bond Insurer s consent may be required in connection with amendments to any applicable Bond documents. 21

22 In the event BAM is unable to make payment of principal and interest as such payments become due under the Policy, the Bonds are payable solely from the Pledged Revenues pursuant to the applicable Bond documents. In the event BAM becomes obligated to make payments with respect to the Bonds, no assurance is given that such event will not adversely affect the market price of the Bonds or the marketability (liquidity) for the Bonds. If a Policy is acquired, the long-term ratings on the Bonds are dependent in part on the financial strength of BAM and its claimpaying ability. BAM s financial strength and claims-paying ability are predicated upon a number of factors which could change over time. No assurance is given that the long-term ratings of BAM and of the ratings on the Bonds insured by BAM will not be subject to downgrade and such event could adversely affect the market price of the Bonds or the marketability (liquidity) for the Bonds. See RATING herein. The obligations of the Bond Insurer are general obligations of BAM and in an event of default by BAM, the remedies available to the Paying Agent/Registrar may be limited by applicable bankruptcy law or other similar laws related to insolvency of insurance companies. None of the Corporation, the City, or the Underwriter have made independent investigation into the claims-paying ability of BAM and no assurance or representation regarding the financial strength or projected financial strength of BAM is given. Thus, when making an investment decision, potential investors should carefully consider the ability of the Corporation to pay principal and interest on the Bonds and the claims-paying ability of BAM, particularly over the life of the Bonds. Claims-Paying Ability and Financial Strength of Municipal Bond Insurers Moody's Investor Services, Inc., S&P Global Ratings, and Fitch Ratings, Inc. (the "Rating Agencies") have downgraded and/or placed on negative watch the claims-paying ability and financial strength of most providers of municipal bond insurance. Additional downgrades or negative changes in the rating outlook for all bond insurers is possible. In addition, past events in the credit markets have had substantial negative effects on the bond insurance business. These developments could be viewed as having a material adverse effect on the claims-paying ability of such bond insurers, including any bond insurer of the Bonds. Thus, when making an investment decision, potential investors should carefully consider the ability of any such bond insurer to pay principal and interest on the Bonds and the claims-paying ability of any such bond insurer, particularly over the life of the Bonds. INVESTMENT AUTHORITY AND INVESTMENT PRACTICES OF THE ISSUER The Corporation invests its investable funds in investments authorized by State law in accordance with investment policies approved by the Board of Directors. Both State law and the Corporation's investment policies are subject to change. As required under State law, the Corporation reviews its investment policy on an annual basis. Legal Investments Under State law, the Corporation is authorized to invest in (1) obligations of the United States or its agencies and instrumentalities, including letters of credit; (2) direct obligations of the State or its agencies and instrumentalities; (3) collateralized mortgage obligations directly issued by a federal agency or instrumentality of the United States, the underlying security for which is guaranteed by an agency or instrumentality of the United States; (4) other obligations, the principal and interest of which is guaranteed or insured by or backed by the full faith and credit of, the State or the United States or their respective agencies and instrumentalities, including obligations that are fully guaranteed or insured by the Federal Deposit Insurance Corporation or by the explicit full faith and credit of the United States; (5) obligations of states, agencies, counties, cities, and other political subdivisions of any state rated as to investment quality by a nationally recognized investment rating firm not less than A or its equivalent; (6) bonds issued, assumed or guaranteed by the State of Israel; (7) certificates of deposit and share certificates meeting the requirements of the Public Funds Investment Act, Chapter 2256, Texas Government Code, as amended, (the PFIA ) (i) that are issued by or through an institution that has its main office or a branch office in Texas and are guaranteed or insured by the Federal Deposit Insurance Corporation or the National Credit Union Share Insurance Fund, or are secured as to principal by obligations described in clauses (1) through (6) or in any other manner and amount provided by law for Corporation deposits; or (ii) where (a) the funds are invested by the Corporation through (I) a broker that has its main office or a branch office in the State and is selected from a list adopted by the Corporation as required by law or (ii) a depository institution that has its main office or a branch office in the State that is selected by the Corporation; (b) the broker or the depository institution selected by the Corporation arranges for the deposit of the funds in certificates of deposit in one or more federally insured depository institutions, wherever located, for the account of the Corporation; (c) the full amount of the principal and accrued interest of each of the certificates of deposit is insured by the United States or an instrumentality of the United States; and (d) the Corporation appoints the depository institution selected under (a) above, a custodian as described by Section (d) of the Texas Government Code, or a clearing broker-dealer registered with the Securities and Exchange Commission and operating pursuant to Securities and Exchange Commission Rule 15c3-3 (17 C.F.R. Section c3-3) as custodian for the Corporation with respect to the certificates of deposit; (8) fully collateralized repurchase agreements that have a defined termination date, are fully secured by a combination of cash and obligations described in clause (1) which are pledged to the Corporation, held in the Corporation's name, and deposited at the time the investment is made with the Corporation or with a third party selected and approved by the Corporation and are placed through a primary government securities dealer, as defined by the Federal Reserve, or a financial institution doing business in the State; (9) securities lending programs if (i) the securities loaned under the program are 100% collateralized, a loan made under the program allows for termination at any time and a loan made under the program is either secured by (a) obligations that are described in clauses (1) through (6) above, (b) irrevocable letters of credit issued by a state or national bank that is continuously rated by a nationally recognized investment rating firm at not less than A or its equivalent or (c) cash invested in obligations described in clauses (1) through (6) above, clauses (11) through (13) below, or an 22

23 authorized investment pool; (ii) securities held as collateral under a loan are pledged to the Corporation, held in the Corporation's name and deposited at the time the investment is made with the governmental body or a third party designated by the governmental body; (iii) a loan made under the program is placed through either a primary government securities dealer or a financial institution doing business in the State; and (iv) the agreement to lend securities has a term of one year or less; (10) certain bankers' acceptances with the remaining term of 270 days or less, if the short-term obligations of the accepting bank or its parent are rated at least A-1 or P-1 or the equivalent by at least one nationally recognized credit rating agency; (11) commercial paper with a stated maturity of 270 days or less that is rated at least A-1 or P-1 or the equivalent by either (a) two nationally recognized credit rating agencies or (b) one nationally recognized credit rating agency if the paper is fully secured by an irrevocable letter of credit issued by a United States or state bank; (12) no-load money market mutual funds registered with and regulated by the United States Securities and Exchange Commission that have a dollar weighted average stated maturity of 90 days or less and include in their investment objectives the maintenance of a stable net asset value of $1 for each share; and (13) no-load mutual funds registered with the United States Securities and Exchange Commission that have an average weighted maturity of less than two years, invest exclusively in obligations described in this paragraph, and are continuously rated as to investment quality by at least one nationally recognized investment rating firm of not less than AAA or its equivalent. In addition, bond proceeds may be invested in guaranteed investment contracts that have a defined termination date and are secured by obligations, including letters of credit, of the United States or its agencies and instrumentalities in an amount at least equal to the amount of bond proceeds invested under such contract, other than the prohibited obligations described in the next succeeding paragraph. The Corporation may invest in such obligations directly or through government investment pools that invest solely in such obligations provided that the pools are rated no lower than AAA or AAA-m or an equivalent by at least one nationally recognized rating service. The Corporation may also contract with an investment management firm registered under the Investment Advisers Act of 1940 (15 U.S.C. Section 80b-1 et seq.) or with the State Securities Board to provide for the investment and management of its public funds or other funds under its control for a term up to two years, but the Corporation retains ultimate responsibility as fiduciary of its assets. In order to renew or extend such a contract, the Corporation must do so by order, ordinance, or resolution. The Corporation is specifically prohibited from investing in: (1) obligations whose payment represents the coupon payments on the outstanding principal balance of the underlying mortgage-backed security collateral and pays no principal; (2) obligations whose payment represents the principal stream of cash flow from the underlying mortgage-backed security and bears no interest; (3) collateralized mortgage obligations that have a stated final maturity of greater than 10 years; and (4) collateralized mortgage obligations the interest rate of which is determined by an index that adjusts opposite to the changes in a market index. Investment Policies Under State law, the Corporation is required to invest its funds under written investment policies that primarily emphasize safety of principal and liquidity; that address investment diversification, yield, maturity, and the quality and capability of investment management; and that include a list of authorized investments for Corporation funds, the maximum allowable stated maturity of any individual investment, the maximum average dollar-weighted maturity allowed for pooled fund groups, methods to monitor the market price of investments acquired with public funds, a requirement for settlement of all transactions, except investment pool funds and mutual funds, on a delivery versus payment basis, and procedures to monitor rating changes in investments acquired with public funds and the liquidation of such investments consistent with the PFIA. All Corporation funds must be invested consistent with a formally adopted Investment Strategy Statement that specifically addresses each fund s investment. Each Investment Strategy Statement will describe its objectives concerning: (1) suitability of investment type, (2) preservation and safety of principal, (3) liquidity, (4) marketability of each investment, (5) diversification of the portfolio, and (6) yield. Under State law, the Corporation s investments must be made with judgment and care, under prevailing circumstances, that a person of prudence, discretion, and intelligence would exercise in the management of the person s own affairs, not for speculation, but for investment, considering the probable safety of capital and the probable income to be derived. At least quarterly, the Corporation s investment officers must submit an investment report to the Board of Directors detailing: (1) the investment position of the Corporation, (2) that all investment officers jointly prepared and signed the report, (3) the beginning market value, the ending market value and the fully accrued interest for the reporting period of each pooled fund group, (4) the book value and market value of each separately listed asset at the end of the reporting period, (5) the maturity date of each separately invested asset, (6) the account or fund or pooled fund group for which each individual investment was acquired, and (7) the compliance of the investment portfolio as it relates to: (a) adopted investment strategies and (b) relevant provisions of the PFIA. No person may invest Corporation funds without express written authority from the Board of Directors. Additional Provisions Under State law, the Corporation is additionally required to: (1) annually review its adopted policies and strategies; (2) adopt by written instrument a rule, order, ordinance or resolution stating that it has reviewed its investment policy and investment strategies and records any changes made to either its investment policy or investment strategy in the respective rule, order, ordinance or resolution; (3) require any investment officers with personal business relationships or relatives with firms seeking to sell securities to the Corporation to disclose the relationship and file a statement with the Texas Ethics Commission and the Board of Directors; (4) require the qualified representative of firms offering to engage in an investment transaction with the Corporation to: (a) receive and review the Corporation s investment policy, (b) acknowledge that reasonable controls and procedures have been implemented to preclude investment transactions conducted between the Corporation and the business organization that are not authorized by the Corporation s investment policy (except to the extent that this authorization is dependent on an analysis of the makeup of the Corporation s entire portfolio or requires an interpretation of subjective investment standards), and (c) deliver a written statement in a form acceptable to the Corporation and the business organization attesting to these requirements; (5) perform an annual audit of the management controls on investments and adherence to the Corporation s investment policy; (6) provide specific investment training for the Treasurer, Chief Financial Officer and investment officers; (7) restrict reverse repurchase agreements to not more than 90 days and restrict the investment of reverse repurchase agreement funds to no greater than the term of the reverse purchase agreement; (8) restrict the investment in non-money market mutual funds in the aggregate to no more than 15% of the Corporation s monthly average fund balance, excluding bond proceeds and reserves and other funds held for debt service; (9) require local 23

24 government investment pools to conform to the new disclosure, rating, net asset value, yield calculation, and advisory board requirements; and (10) at least annually review, revise and adopt a list of qualified brokers that are authorized to engage in investment transactions with the Corporation. Current Investments As of July 31, 2016, all of the Corporation s investable funds in the amount of $2,506,448 (unaudited) were invested in a Pooled Cash Bank Account with the Corporation s depository bank. As of such date, the market value of such investments (as determined by the Corporation by reference to published quotations, dealer bids, and comparable information) was approximately 100% of their book value. No funds of the Corporation are invested in derivative securities, i.e., securities whose rate of return is determined by reference to some other instrument, index, or commodity. ANTICIPATED ISSUANCE OF ADDITIONAL DEBT The Corporation does not anticipate the additional issuance of debt in the next twelve months. The Corporation will continue to explore opportunities for economic development and may make commitments with respect to funds on hand available for such purpose or from moneys to be received subject to the flow of funds under the Resolution or through the issuance of Additional Parity Obligations. RATING S&P Global Ratings ( S&P ) has assigned a rating of AA to the Bonds with the understanding that, concurrently with the delivery of the Bonds, The Policy will be issued by BAM. The Issuer received an underlying rating of A+ from S&P. The rating of the Bonds by S&P reflects only the view of S&P at the time the rating is given, and the Issuer makes no representations as to the appropriateness of the rating. There is no assurance that such a rating will continue for any given period of time or that it will not be revised downward or withdrawn entirely by S&P if, in the judgment of S&P, circumstances so warrant. Any such downward revision or withdrawal of the rating may have an adverse effect on the market price of the Bonds. TAX MATTERS The following discussion describes certain U.S. federal income tax considerations of United States persons that are beneficial owners ("Owners") of the Bonds. This discussion is based upon the provision of the Internal Revenue Code of 1986, as amended (the "Code"), applicable Treasury Regulations promulgated and proposed thereunder, judicial authority and administrative interpretations, as of the date hereof, all of which are subject to change, possibly with retroactive effect, or are subject to different interpretations. Owners cannot be assured that the Internal Revenue Service (the "Service") will not challenge one or more of the tax consequences described herein, and neither the Corporation nor Bond Counsel has obtained, nor does the Corporation or Bond Counsel intend to obtain, a ruling from the Service with respect to the U.S. federal tax consequences of acquiring, holding or disposing of the Bonds. This summary is limited to initial holders who purchase the Bonds for cash at their "issue price" (which will equal the first price at which a substantial portion of the Bonds are sold for cash to persons other than bondhouses, brokers or similar persons or organizations acting in the capacity of underwriters, placement agents, or wholesalers) and who hold the Bonds as capital assets within section 1221 of the Code (generally property held for investment). This summary does not discuss all of the tax consequences that may be relevant to an Owner in light of its particular circumstances or to Owners subject to special rules, such as certain financial institutions, insurance companies, tax-exempt organizations, foreign taxpayers, taxpayers who may be subject to the alternative minimum tax or personal holding company provisions of the Code, dealers in securities or foreign currencies, or Owners whose functional currency (as defined in section 985 of the Code) is not the U.S. dollar, or to an Owner that might have purchased the Bonds in circumstances that would give rise to original issue discount, acquisition premium, market discount or amortizable premium. Except as stated herein, this summary describes no federal, state or local tax consequences resulting from the ownership of, receipt of interest on, or disposition of, the Bonds. Investors who are subject to special provisions of the Code should consult their own tax advisors regarding the tax consequences to them of purchasing, holding, owning and disposing of the Bonds, including the advisability of making any of the elections described below, before determining whether to purchase the Bonds. The Code generally defines a "United States person" as (i) an individual who, for U.S. federal income tax purposes, is a citizen or resident of the United States, (ii) a corporation or other entity taxable as a corporation for U.S. federal income tax purposes, that was created or organized in or under the laws of the United States, and any state thereof or the District of Columbia or any political subdivision thereof, (iii) an estate the income of which is subject to U.S. federal income taxation regardless of its source, and (iv) a trust whose administration is subject to the primary supervision of a United States court and which has one or more United States persons who have the authority to control all substantial decisions of the trust. If a partnership (including an entity treated as a partnership for U.S. federal income tax purposes) holds Bonds, the tax treatment of a partner will generally depend upon the status of the partner and the activities of the partnership. Any Owner of the Bonds that is a partner of a partnership that will hold Bonds should consult its tax advisor. This discussion does not address any tax considerations arising under the laws of any foreign, state, local or other jurisdiction. 24

25 Payments of Interest Stated interest paid (and other original issue discount) on each Bond will generally be taxable in each tax year held by an Owner as ordinary interest income without regard to the time it otherwise accrues or is received in accordance with the Owner's method of accounting for federal income tax purposes. Disposition or Retirement Upon the sale, exchange or certain other dispositions of a Bond, or upon the retirement of a Bond (including by redemption), an Owner will generally recognize capital gain or loss. This gain or loss will equal the difference, if any, between the Owner's adjusted tax basis in the Bond and the proceeds the Owner receives, excluding any proceeds attributable to accrued interest, which will be recognized as ordinary interest income to the extent the Owner has not previously included in the accrued interest income. The proceeds an Owner receives will include the amount of any cash and the fair market value of any other property received for the Bond. An Owner's tax basis in the Bond will generally equal the amount the Owner paid for the Bond. The gain or loss will be longterm capital gain or loss if the Owner held the Bond for more than one year. Long-term capital gains of individuals, estates and trusts currently are subject to a reduced tax rate. The deductibility of capital losses may be subject to limitation. Information Reporting and Backup Withholding Information reporting will apply to payments of interest on, or the proceeds of the sale or other disposition of, the Bonds held by an Owner, and backup withholding may apply unless such Owner provides the appropriate intermediary with a taxpayer identification number, certified under penalties of perjury, as well as certain other information or otherwise establishes an exemption from backup withholding. Any amount withheld under the backup withholding rules is allowable as a credit against the Owner's actual U.S. federal income tax liability and such Owner timely provides the required information or appropriate claim form to the Service. CONTINUING DISCLOSURE OF INFORMATION In the Resolution, the Corporation has made the following agreement for the benefit of the holders and beneficial owners of the Bonds. The Corporation is required to observe the agreement for so long as it remains obligated to advance funds to pay the Bonds. Under the agreement, the Corporation will be obligated to provide certain updated financial information and operating data annually and timely notice of certain specified events to the Municipal Securities Rulemaking Board (the MSRB ). The information provided to the MSRB will be available to the public free of charge via the Electronic Municipal Market Access ( EMMA ) system through an internet website accessible at Annual Reports The Corporation will provide certain updated financial information and operating data to the MSRB annually. The information to be updated includes all quantitative financial information and operating data with respect to the Corporation of the general type included in Tables 1 through 8 of Appendix A to this Official Statement. The Corporation will update and provide this information within six months after the end of each fiscal year ending in or after The Corporation will additionally provide audited financial statements when and if available, and in any event, within 12 months after the end of each fiscal year ending in and after If the audit of such financial statements is not complete within 12 months after any such fiscal year end, then the Corporation will file unaudited financial statements within such 12 month period and audited financial statements for the applicable fiscal year, when and if the audit report on such statements becomes available. Any such financial statements will be prepared in accordance with the accounting principles described in APPENDIX E or such other accounting principles as the Corporation may be required to employ from time to time pursuant to State law or regulation. The Corporation will provide the updated information to the MSRB in an electronic format, which will be available through EMMA to the general public without charge. The Corporation may provide updated information in full text or may incorporate by reference certain other publicly available documents, as permitted by the United States Securities and Exchange Commission s Rule 15c2-12 (the Rule ). The Corporation's current fiscal year end is September 30. Accordingly, it must provide updated financial information and operating data by the last day of March in each year and the audited financial statements must be provided by September 30 of each year, unless the Corporation changes its fiscal year. If the Corporation changes its fiscal year, it will notify the MSRB of the change. Notice of Certain Events The Corporation will also provide timely notices of certain events to the MSRB. The Corporation will provide notice of any of the following events with respect to the Bonds to the MSRB in a timely manner (but not in excess of ten business days after the occurrence of the event): (1) principal and interest payment delinquencies; (2) non-payment related defaults, if material; (3) unscheduled draws on debt service reserves reflecting financial difficulties; (4) unscheduled draws on credit enhancements reflecting financial difficulties; (5) substitution of credit or liquidity providers, or their failure to perform; (6) adverse tax opinions, the issuance by the Internal Revenue Service of proposed or final determinations of taxability, Notices of Proposed Issue (IRS Form 5701-TEB), or other material notices or determinations with respect to the tax status of the Bonds, or other material events affecting the tax status of the Bonds (provided, however, that the Bonds are issued as taxable obligations ); (7) modifications to rights of holders of the Bonds, if material; (8) Bond calls, if material, and tender offers; (9) defeasances; (10) release, substitution, or sale of property securing repayment of the Bonds, if material; (11) rating changes; (12) bankruptcy, insolvency, receivership, or similar event of the Corporation, which shall occur as described below; (13) the consummation of a merger, consolidation, or acquisition involving the Corporation or the sale of all or substantially all of its assets, other than in the ordinary course of business, the entry into of a definitive agreement to undertake such an action or the termination of a definitive agreement relating to any such actions, other than pursuant to its terms, 25

26 if material; and (14) appointment of a successor or additional trustee or the change of name of a trustee, if material. Neither the Bonds nor the Resolution make any provision for credit enhancement (though the Corporation has made application to municipal bond insurance companies and will consider the purchase of such insurance after an analysis of such bids) or liquidity enhancement for the Bonds. Because the Bonds are taxable in nature, the Corporation will not provide any notice as to change in tax status. In addition, the Corporation will provide timely notice of any failure by the Corporation to provide annual financial information in accordance with their agreement described above under Annual Reports. For these purposes, any event described in clause (12) in the immediately preceding paragraph is considered to occur when any of the following occur: the appointment of a receiver, fiscal agent, or similar officer for the Corporation in a proceeding under the United States Bankruptcy Code or in any other proceeding under state or federal law in which a court or governmental authority has assumed jurisdiction over substantially all of the assets or business of the Corporation, or if such jurisdiction has been assumed by leaving the existing governing body and officials or officers in possession but subject to the supervision and orders of a court or governmental authority, or the entry of an order confirming a plan of reorganization, arrangement, or liquidation by a court or governmental authority having supervision or jurisdiction over substantially all of the assets or business of the Corporation. Availability of Information from MSRB The Corporation has agreed to provide the foregoing information only to the MSRB. The MSRB intends to make the information available to the public without charge through an internet portal at Limitations and Amendments The Issuer has agreed to update information and to provide notices of certain specified events only as described above. The Issuer has not agreed to provide other information that may be relevant or material to a complete presentation of its financial results of operations, condition, or prospects or agreed to update any information that is provided, except as described above. The Issuer makes no representation or warranty concerning such information or concerning its usefulness to a decision to invest in or sell Bonds at any future date. The Issuer disclaims any contractual or tort liability for damages resulting in whole or in part from any breach of its agreement or from any statement made pursuant to its agreement, although holders or beneficial owners of Bonds may seek a writ of mandamus to compel the Issuer to comply with its agreement. The Issuer may amend its agreement to adapt to changed circumstances that arise from a change in legal requirements, a change in law, or a change in the identity, nature, status, or type of operations of the Issuer, if the agreement, as amended, would have permitted an underwriter to purchase or sell Bonds in the offering described herein in compliance with the Rule, taking into account any amendments or interpretations of the Rule to the date of such amendment, as well as such changed circumstances, and either the holders of a majority in aggregate principal amount of the outstanding Bonds consent or any person unaffiliated with the Issuer (such as nationally recognized bond counsel) determines that the amendment will not materially impair the interests of the beneficial owners of the Bonds. The Issuer may also repeal or amend its agreement if the SEC amends or repeals the applicable provisions of the Rule or any court of final jurisdiction enters judgment that such provisions of the Rule are invalid, but in either case only if and to the extent that the provisions of this sentence would not prevent an underwriter from lawfully purchasing or selling Bonds in the primary offering of the Bonds giving effect to (a) such provisions as so amended and (b) any amendments or interpretations of the Rule. If the Issuer amends its agreement, it must include with the next financial information and operating data provided in accordance with its agreement described above under Annual Reports an explanation, in narrative form, of the reasons for the amendment and of the impact of any change in the type of information and data provided. Compliance with Prior Agreements The Corporation has not previously entered into any continuing disclosure undertaking agreements in accordance with the Rule. Legal Matters OTHER PERTINENT INFORMATION The Issuer will furnish to the Underwriter a complete transcript of proceedings incident to the authorization and issuance of the Bonds, including the unqualified approving legal opinion of the Attorney General of Texas to the effect that the Bonds are valid and legally binding special obligations of the Corporation, and based upon examination of such transcript of proceedings, the approval of certain legal matters by Bond Counsel, to the effect that the Bonds, issued in compliance with the provisions of the Resolution, are valid and legally binding obligations of the Corporation. The customary closing papers, including a certificate to the effect that no litigation of any nature has been filed or is then pending to restrain the issuance and delivery of the Bonds, or which would affect the provision made for their payment or security, or in any manner questioning the validity of the Bonds will also be furnished. Bond Counsel was not requested to participate, and did not take part, in the preparation of the Official Statement, and such firm has not assumed any responsibility with respect thereto or undertaken independently to verify any of the information contained therein, except that, in its capacity as Bond Counsel, such firm has reviewed the information under the captions or subcaptions "THE BONDS" (other than the information under the subcaptions "Payment Record", Use of Bond Proceeds and Bondholders Remedies, as to which no opinion is expressed), "SECURITY FOR THE BONDS", REGISTRATION, TRANSFER AND EXCHANGE, "TAX MATTERS", "CONTINUING DISCLOSURE OF INFORMATION" (other than the information under the subcaption "Compliance with Prior Agreements", as to which no opinion is expressed), and the subcaptions "Legal Matters" (except for the last two sentences of the second paragraph thereof, as to which no opinion is expressed), Registration and Qualification of Bonds for Sale, and "Legal Investments and Eligibility to Security Public Funds in Texas" under the caption "OTHER PERTINENT INFORMATION" in the Official Statement, and SELECTED PROVISIONS OF THE RESOLUTION in APPENDIX D, and such firm is of the opinion that the information relating to the Bonds and the legal issues contained under such captions and subcaptions is an accurate and fair description of the laws and legal issues addressed therein and, with respect to the Bonds, such information conforms to the provisions of the Resolution. The legal opinion may accompany the Bonds deposited with DTC or may be printed on the Bonds in the event of the discontinuance of the Book-Entry-Only System. 26

27 Such firm has not, however, independently verified any of the factual information contained in this Official Statement nor has it conducted an investigation of the affairs of the Issuer for the purpose of passing upon the accuracy or completeness of this Official Statement. No person is entitled to rely upon such firm s limited participation as an assumption of responsibility for, or an expression of opinion of any kind with regard to the accuracy or completeness of any of the information contained herein. Though it represents the Financial Advisor and the Underwriter from time to time in matters unrelated to the issuance of the Bonds, Bond Counsel has been engaged by and only represents the Corporation and the City in connection with the issuance of the Bonds. The legal fees to be paid Bond Counsel for services rendered in connection with the issuance of the Bonds are contingent on the sale and delivery of the Bonds. Certain legal matters will be passed upon for the Underwriter by its counsel, Andrews Kurth Kenyon LLP, Austin, Texas. The fees of Underwriter s Counsel are contingent upon the delivery of the Bonds. The legal opinions to be delivered concurrently with the delivery of the Bonds express the professional judgment of the respective attorneys rendering the opinions as to the legal issues explicitly addressed therein. In rendering a legal opinion, the attorney does not become an insurer or guarantor of that expression of professional judgment, of the transaction opined upon, or of the future performance of the parties to the transaction, nor does the rendering of an opinion guarantee the outcome of any legal dispute that may arise out of the transaction. Registration and Qualification of Bonds for Sale The sale of the Bonds has not been registered under the Securities Act of 1933, as amended, in reliance upon the exemption provided thereunder by Section 3(a)(2). The Bonds have not been approved or disapproved by the SEC, nor has the SEC passed upon the accuracy or adequacy of the Official Statement. The Bonds have not been registered or qualified under the Securities Act of Texas in reliance upon various exemptions contained therein; nor have the Bonds been registered or qualified under the securities acts of any other jurisdiction. The Corporation assumes no responsibility for registration or qualification of the Bonds under the securities laws of any jurisdiction in which the Bonds may be sold, assigned, pledged, hypothecated or otherwise transferred. This disclaimer of responsibility for registration or qualification for sale or other disposition of the Bonds shall not be construed as an interpretation of any kind with regard to the availability of any exemption from securities registration or qualification provisions. It is the obligation of the Underwriter to register or qualify sale of the Bonds under the securities laws of any jurisdiction which so requires. The Corporation will cooperate, at the Underwriter s written request and expense, in registering or qualifying the Bonds or in obtaining an exemption from registration or qualification in any state where such action is necessary; provided, however, that the Corporation shall not be required to execute a general or special consent to service of process in any jurisdiction. Litigation At the time of this Official Statement, neither the Issuer nor the City is a party to any litigation or other proceeding pending or to its knowledge, threatened, in any court, agency or other administrative body (either State or federal) which, if decided adversely to the Issuer or the City, would have a material adverse effect on the financial condition of the Issuer. On the date of delivery of the Bonds to the Underwriter, the Corporation will execute and deliver to the Underwriter a certificate to the effect that no litigation of any nature has been filed or is pending, as of that date, to restrain or enjoin the issuance or delivery of the Bonds or which would affect the provisions made for their payment or security or in any manner question the validity of the Bonds. Legal Investments and Eligibility to Secure Public Funds in Texas Section of the Public Security Procedures Act, as amended, provides that the Bonds are negotiable instruments, investment securities governed by Chapter 8, Texas Business and Commerce Code, as amended, and are legal and authorized investments for insurance companies, fiduciaries, and trustees, and for the sinking funds of municipalities or other political subdivisions or public agencies of the State. With respect to investment in the Bonds by municipalities or other political subdivisions or public agencies of the State, the PFIA requires that the Bonds be assigned a rating of at least "A" or its equivalent as to investment quality by a national rating agency. (See "RATING" herein.) In addition, various provisions of the Texas Finance Code, as amended, provide that, subject to a prudent investor standard, the Bonds are legal investments for state banks, savings banks, trust companies with capital of one million dollars or more, and savings and loan associations. The Bonds are eligible to secure deposits of any public funds of the State, its agencies, and its political subdivisions, and are legal security for those deposits to the extent of their fair market value. No review by the City or the Corporation has been made of the laws in other states to determine whether the Bonds are legal investments for various institutions in those states. No representation is made that the Bonds will be acceptable to public entities to secure their deposits or acceptable to such institutions for investment purposes. Neither the City nor the Corporation has made an investigation of other laws, rules, regulations or investment criteria which might apply to any such persons or entities or which might otherwise limit the suitability of the Bonds for any of the foregoing purposes or limit the authority of such persons or entities to purchase or invest in the Bonds for such purposes. Underwriting Raymond James & Associates, Inc. (the Underwriter ) has agreed, subject to certain conditions, to purchase the Bonds from the Issuer at a price of $6,629, (representing the par amount of the Bonds of $6,500,000.00, plus a reoffering premium of $173,730.10, and less an Underwriter s discount of $44,062.50), plus accrued interest on the Bonds from the Dated Date to the date of initial delivery of the Bonds to the Underwriter. The Underwriter s obligation is subject to certain conditions precedent. The Underwriter will be obligated to purchase all of the Bonds, if any of the Bonds are purchased. The Bonds may be offered and sold to certain dealers (including the Underwriter and other dealers depositing Bonds into investment trusts) and others at prices lower than such public offering prices, and such public prices may be changed, from time to time, by the Underwriter. The Underwriter has provided the following sentence for inclusion in this Official Statement: The Underwriter has reviewed the information in this Official Statement pursuant to its responsibilities to investors under the federal securities laws, but the Underwriter does not guarantee the accuracy or completeness of such information. 27

28 Forward-Looking Statements Disclaimer The statements contained in this Official Statement, and in any other information provided by the Issuer, that are not purely historical, are forward-looking statements, including statements regarding the Issuer's expectations, hopes, intentions, or strategies regarding the future. Readers should not place undue reliance on forward-looking statements. All forward-looking statements included in this Official Statement are based on information available to the Issuer on the date hereof, and the Issuer assumes no obligation to update any such forward-looking statements. The Issuer's actual results could differ materially from those discussed in such forward-looking statements. The forward-looking statements included herein are necessarily based on various assumptions and estimates and are inherently subject to various risks and uncertainties, including risks and uncertainties relating to the possible invalidity of the underlying assumptions and estimates and possible changes or developments in social, economic, business, industry, market, legal, and regulatory circumstances and conditions and actions taken or omitted to be taken by third parties, including customers, suppliers, business partners and competitors, and legislative, judicial, and other governmental authorities and officials. Assumptions related to the foregoing involve judgments with respect to, among other things, future economic, competitive, and market conditions and future business decisions, all of which are difficult or impossible to predict accurately and many of which are beyond the control of the Issuer. Any of such assumptions could be inaccurate and, therefore, there can be no assurance that the forward-looking statements included in this Official Statement will prove to be accurate. Financial Advisor SAMCO Capital Markets, Inc., as Financial Advisor to the Corporation and the City, has compiled certain data relating to the Bonds and has assisted in drafting this Official Statement. The Financial Advisor has not independently verified any of the data contained herein or conducted a detailed investigation of the affairs of the Issuer to determine the accuracy or completeness of this Official Statement. Because of its limited participation, the Financial Advisor assumes no responsibility for the accuracy or completeness of any of the information contained herein. The fees for Financial Advisor are contingent upon the issuance, sale and delivery of the Bonds. In the normal course of business, the Financial Advisor may also from time to time sell investment securities to the Corporation or the City for the investment of bond proceeds or other funds of the Corporation or City upon request. The Financial Advisor has provided the following sentence for inclusion in this Official Statement. The Financial Advisor has reviewed the information in this Official Statement in accordance with, and as part of, its responsibilities to the Corporation, and as applicable, to investors under the federal securities laws as applied to the facts and circumstances of this transaction, but the Financial Advisor does not guarantee the accuracy or completeness of such information. Miscellaneous The financial data and other information contained in this Official Statement have been obtained from the Issuer s records, audited and unaudited financial statements of the Corporation, the Texas Comptroller of Public Accounts and other sources which are believed to be reliable. There is no guarantee that any of the assumptions or estimates contained herein will be realized. All of the summaries of the statutes, documents and the Resolution contained in this Official Statement are made subject to all of the provisions of such statues, documents and the Resolution. These summaries do not purport to be complete statements of such provisions and reference is made to such original documents for further information. Reference is made to original documents in all respects. References to web site addresses presented herein are for informational purposes only and may be in the form of a hyperlink solely for the reader s convenience. Unless specified otherwise, such web sites and the information or links contained therein are not incorporated into, and are not part of, this Official Statement for purposes of, and as that term is defined in, the Rule. The Resolution has been approved the form and content of this Official Statement, and any addenda, supplement or amendment thereto issued on behalf of the Corporation, and authorized its further use in the reoffering of the Bonds by the Underwriter. This Official Statement has been approved by the Board of Directors of the Corporation for distribution in accordance with the provisions of the SEC rule codified at 17 C.F.R. Section c2-12. ATTEST: /s/ Christina McDonald Secretary, Board of Directors MARBLE FALLS ECONOMIC DEVELOPMENT CORPORATION /s/ Steve Reitz President, Board of Directors 28

29 APPENDIX A FINANCIAL INFORMATION OF THE ISSUER

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31 FINANCIAL INFORMATION FOR THE ISSUER SALES TAX DEBT SERVICE REQUIREMENTS TABLE 1 Fiscal Year Currently Total Net Ending Outstanding The Bonds Debt Sept. 30 Debt Service Principal Interest Total Service 2016 $ 726,308 $ 726, ,054 $ 250,000 $ 180,007 $ 430,007 1,158, , , , ,238 1,133, , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , ,000 86, , , ,000 66, , , ,000 45, , , ,000 23, , ,038 Total $ 5,860,000 $ 6,500,000 $ 3,508,957 $ 10,008,957 $ 15,868,957 DEBT SERVICE COVERAGE TABLE 2 Maximum Annual Debt Service Requirements (2017) $ 1,158,061 Gross Sales Tax Revenues for Fiscal Year $ 1,859,042 Estimated Pro Forma Coverage based on Total Revenues Available 1.61X Average Annual Debt Service (Excludes 2016) $ 757,132 Gross Sales Tax Revenues for Fiscal Year $ 1,859,042 Estimated Pro Forma Coverage 2.46X A-1

32 PRINCIPAL REPAYMENT SCHEDULE TABLE 3 (As of August, 2016) Principal Repayment Schedule Principal Percent of Fiscal Year Currently Unpaid at Principal Ending 9-30 Outstanding The Bonds Total End of Year Retired (%) 2016 $ - 10,670, % ,000 $ 250, ,000 9,855, % , , ,000 9,145, % , , ,000 8,625, % , , ,000 8,090, % , , ,000 7,530, % , , ,000 6,950, % , , ,000 6,345, % , , ,000 5,715, % , , ,000 5,060, % , , ,000 4,380, % , , ,000 3,665, % , ,000 3,330, % , ,000 2,980, % , ,000 2,610, % , ,000 2,225, % , ,000 1,820, % , ,000 1,395, % , , , % , , , % , , % Total $ 4,170,000 $ 6,500,000 $ 10,670,000 REVENUE BOND DEBT DATA TABLE 4 Revenue Bond Debt Principal Outstanding (as of December 1, 2016) Sales Tax Revenue Refunding Bond, Taxable Series 2012 $ 625,000 Sales Tax Revenue Bond, Taxable Series ,545,000 Total $ 4,170,000 Prospective Sales Tax Revenue Bond Debt Principal Sales Tax Revenue Bonds, Taxable Series 2017 (the "Bonds") 6,500,000 Total Revenue Debt Principal Outstanding Following the Issuance of the Bonds $ 10,670,000 A-2

33 SALES TAX COLLECTIONS - MARBLE FALLS EDC TABLE 5 The following table shows a five-year history of Sales Tax collections for the Marble Falls Economic Development Corporation s 1/2 of 1% of sales tax, as well as fiscal year 2016 year-to-date (unaudited) collections. It does not include sales tax collections for the 1% general sales tax for the City, or the 1/2 of 1% collections for property tax relief. The Marble Falls Economic Development Corporation sales tax levy and collection of 1/2 of 1% was approved by voters at an election held on May 12, (1) Year-to-Date Fiscal Year (1) Fiscal Year Fiscal Year Fiscal Year Fiscal Year Fiscal Year October $ 159,987 $ 137,128 $ 146,806 $ 136,682 $ 127,026 $ 118,449 November 174, , , , , ,385 December 151, , , , , ,479 January - 149, , , , ,961 February - 194, , , , ,175 March - 134, , , , ,072 April - 142, , , , ,031 May - 177, , , , ,476 June - 162, , , , ,394 July - 161, , , , ,371 August - 192, , , , ,991 September - 171, , , , ,320 Total $ 486,122 $ 1,933,909 $ 1,859,346 $ 1,781,025 $ 1,654,339 $ 1,495,104 As of December, 2016; unaudited. Source: State Comptroller's Office of the State of Texas. Note: Sale tax revenues noted above are listed by the month in which the City received them from the State, which is two months after they are generated. SALES TAX COLLECTIONS - CITY OF MARBLE FALLS, TEXAS TABLE 6 The following table shows a five-year history of Sales Tax collections for the City's 1% general sales tax receipts and 1/2 of 1% for property tax relief and is provided for informational purposes only. It does not include 1/2 of 1% sales tax collections for the Marble Falls Economic Development Corporation. Revenues from the City's 1% general sales tax receipts ARE NOT PLEDGED to the payment of the Bonds. (1) Year-to-Date Fiscal Year (1) Fiscal Year Fiscal Year Fiscal Year Fiscal Year Fiscal Year October $ 479,960 $ 411,385 $ 440,417 $ 410,045 $ 381,078 $ 355,346 November 524, , , , , ,155 December 454, , , , , ,438 January - 449, , , , ,883 February - 582, , , , ,524 March - 403, , , , ,215 April - 426, , , , ,093 May - 531, , , , ,429 June - 486, , , , ,182 July - 484, , , , ,113 August - 578, , , , ,974 September - 514, , , , ,960 Total $ 1,458,365 $ 5,801,728 $ 5,578,037 $ 5,343,076 $ 4,963,018 $ 4,485,312 As of December 2016; unaudited. Source: State Comptroller's Office of the State of Texas. Note: Sales tax revenues noted above are listed by the month in which the City received them from the State, which is two months after they are generated. A-3

34 CORPORATION OPERATING STATEMENT TABLE 7 Fiscal Year Ended September (2) 2014 (1) Fund Balance - Beginning of Year $ 3,063,450 $ 1,989,231 $ 1,570,394 $ 1,108,128 $ 785,637 Revenues Sales Taxes $ 1,859,042 $ 1,796,252 $ 1,688,590 $ 1,503,681 $ 1,469,440 Other Revenues 55,669 51,316 50,788 39,311 60,631 Total Revenues $ 1,914,711 $ 1,847,568 $ 1,739,378 $ 1,542,992 $ 1,530,071 Expenditures General Government $ 1,834,269 $ 848,904 $ 835,160 $ 415,225 $ 319,734 Capital Outlay 150,830 3,507, , ,975 Debt Service 726, , , , ,116 Bond Issuance Costs - 56,988-40, Total Expenditures $ 2,711,430 $ 4,739,756 $ 1,161,410 $ 923,295 $ 839,229 Excess of Revenues Over Expenditures $ (796,719) $ (2,892,188) $ 577,968 $ 619,698 $ 690,843 Other Financing Sources (Uses): Capital-related Debt Issued $ - $ 4,000,000 $ - $ 1,790,000 $ - Sale of Capital Assets 77, , ,869 92, ,148 Payment to Escrow Agent (1,749,988) - Proceeds from Insurance - 74, Transfers In (Out) (255,000) (361,710) (275,000) (290,000) (574,500) Total $ (177,735) $ 3,966,407 $ (159,131) $ (157,431) $ (368,352) Fund Balance - End of Year $ 2,088,997 $ 3,063,450 $ 1,989,231 $ 1,570,394 $ 1,108,128 Gross Sales Tax Receipts 1,859,042 1,796,252 1,688,590 1,503,681 1,469,440 Annual Debt Service Payment 726, , , , ,116 Debt Service Coverage 2.56X 5.51X 5.18X 4.32X 4.25X Source: The City s Comprehensive Annual Financial Reports. (1) Significant components of increase in General Governmental spending, Capital Outlay and Transfer Out of the EDC as detailed below: Perfomance Agreement payment #2 of 5 to Baylor Scott and White $ 302,670 Land Acquisition for Waterfront Parcel for future Hotel/Conference Center 3,249,184 Site Clearing and Preparation for Phase III of Business and Technology Park 196,740 Transfer to City for Engineering related to Wastewater Treatment Plant expansion 195,000 Roof Repair to EDC Building 196,740 Transfer to City of electric line to water tower near hospital 100,000 Total $ 4,240,334 (2) Significant components of I'ncrease in General Governmental spending, Capital Outlay and Transfer Out of the EDC as detailed below: Perfomance Agreement payment #3 of 5 to Baylor Scott and White $ 1,177,050 Land Acquisition for expansion of Westside Park 92,942 Construction of road to access Phase III of Business and Technology Park 26,330 Consulting fees related to Hotel/Conference Center development 31,558 Transfer to City for Engineering related to Wastewater Treatment Plant expansion 230,000 Total $ 1,557,880 FUND BALANCE TABLE 8 (As of September 30, 2016, unaudited) Economic Development Corporation Fund $ 2,149,368 A-4

35 APPENDIX B GENERAL INFORMATION REGARDING THE CITY OF MARBLE FALLS, TEXAS AND BURNET COUNTY, TEXAS

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37 CITY OF MARBLE FALLS, TEXAS Location The City of Marble Falls, Texas (the City ) is located in the heart of the Texas Hill Country on U.S The City is 47 miles northwest of Austin and 85 miles north of San Antonio. The City lies immediately north of Lake Marble Falls, one of a chain of lakes created by dams on the Colorado River, collectively known as the Highland Lakes. The six Highland lakes Buchanan, Inks, LBJ, Marble Falls, Travis and Austin form the largest chain of lakes in Texas. Government The City is a Home Rule municipal corporation operating under its own charter since August 9, The charter provides that the City will operate under the council/manager form of government pursuant to the laws of the State of Texas. The City Council consists of the Mayor and six Council-Members, all elected at large for two year terms and for no more than three consecutive terms. The City Council appoints the City Manager, who is the City s chief administrative officer. Population Economy Calendar Year City of Marble Falls , , , , , , , , , , ,390 The City is a market and tourist center. Nearby Granite Mountain is the site of a quarry where commercial granite is recovered in vast quantities. Located in the middle of Highland Lakes, the City lies adjacent to hundreds of miles of waterway which offers tourists all types of recreational activity. Horseshoe Bay is a resort on Lake LBJ approximately five miles from the City. Among the seven golf courses located within a 20-mile radius of the City are 54 holes designed by Robert Trent Jones at Horseshoe Bay. Tourists are also attracted to the natural beauty of the Texas Hill Country surrounding the City. Principal Employers Employer Employees Percentage of Total City Employment Marble Falls ISD % Wal-Mart % Baylor Scott & White % H.E. B Grocery Company % Lowe s % Granite Mesa % City of Marble Falls % Johnson-Sewell Ford Lincoln Mercury % The Home Depot % Cold Spring Texas Granite % Source: The Issuer s Comprehensive Financial Report for Fiscal Year Ended September 30, 2015.

38 BURNET COUNTY, TEXAS Location Burnet County, Texas (the County or Burnet County ) was created in 1852 from parts of Bell, Williamson and Travis Counties, Texas and named after David G. Burnet, provisional president of the Republic of Texas. Its county seat is Burnet, which is located in the center of the County, with Marble Falls to the South, Bertram to the East. Burnet is named as The Bluebonnet Capital of Texas. Burnet County is traversed by U.S. Highways 183 and 281, State Highways 29 and 71 and six farm-to-market roads. Activities that attract tourists to the County include hunting, fishing, water sports, Longhorn Caverns and Inks Lake State Park. Minerals produced in the County include stone, graphite, sand and gravel. The Texas Almanac designates cattle, sheep, and goats as principal sources of agricultural income. Wholesale and retail trades also make significant contributions to the economy of the County. Recreation in Burnet County includes scenic drives, visits to lakes (Buchanan, Inks, LBJ, Marble Falls or Travis) and trips to Inks Lake State Park or Longhorn Caverns State Park. There are ample opportunities for hunting and fishing. Principal Employers Employer Employees Percentage of Total County Employment Marble Falls ISD % Burnet CISD % Wal-Mart Stores, Inc % Burnet County % H.E.B. Grocery % Baylor Scott & White % Home Depot, USA % Edwards Risk Management % City of Burnet % Texas Dept of Criminal Justice % Labor Force Statistics (1) 2016 (2) 2015 (3) 2014 (3) 2013 (3) Civilian Labor Force 21,305 21,141 21,499 20,858 Total Employed 20,573 20,362 20,574 19,725 Total Unemployed ,133 % Unemployment 3.4% 3.7% 4.3% 5.4% %Unemployed (Texas) 4.4% 4.5% 5.1% 6.2% %Unemployed (U.S.) 4.7% 5.3% 6.2% 7.4% (1) Source: Texas Workforce Commission. (2) As of October, (3) Average annual statistics.

39 APPENDIX C FORM OF LEGAL OPINION OF BOND COUNSEL

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41 $6,500,000 MARBLE FALLS ECONOMIC DEVELOPMENT CORPORATION SALES TAX REVENUE BONDS, TAXABLE SERIES 2017 WE HAVE ACTED AS BOND COUNSEL in connection with the issuance by the Marble Falls Economic Development Corporation (the Corporation ) of $6,500,000 aggregate original principal amount of its Sales Tax Revenue Bonds, Taxable Series 2017, dated December 15, 2016 (the "Bonds"). WE HAVE EXAMINED the applicable and pertinent provisions of the Constitution and laws of the State of Texas; the resolution of the Board of Directors of the Corporation authorizing the Bonds (the "Resolution ); a transcript of certified proceedings of the Board of Directors of the Corporation relating to the authorization, issuance, sale and delivery of the Bonds, and other pertinent instruments authorizing and relating to the issuance of the Bonds. We have examined the Initial Bond (as defined in the Resolution) which we found to be in due form and properly executed. As to questions of fact material to our opinion, we have relied upon the certified proceedings and other certifications of public officials and officers of the Corporation and the City of Marble Falls, Texas (the City ) furnished to us without undertaking to verify the same by independent investigation. BASED ON OUR EXAMINATION, we are of the opinion that: 1. The transcript of certified proceedings evidences complete legal authority for the issuance of the Bonds in full compliance with the Constitution and laws of the State of Texas presently in effect; the Bonds constitute valid and legally binding special obligations of the Corporation enforceable in accordance with the terms and conditions thereof, except to the extent that the rights and remedies of the owners of the Bonds may be limited by laws heretofore or hereafter enacted relating to bankruptcy, insolvency, reorganization, moratorium or other similar laws affecting the rights of creditors of political subdivisions and the exercise of judicial discretion in appropriate cases. 2. The Bonds are secured by and payable solely, both as to principal and interest, from the receipts of a sales and use tax levied by the City for the benefit of the Corporation, which taxes have been pledged irrevocably to pay the principal of and interest on the Bonds.

42 3. The Bonds are special obligations solely of the Corporation and are not obligations of the State of Texas, the City nor any political corporation, subdivision or agency of the State. IT IS FURTHER OUR OPINION THAT THE BONDS ARE NOT OBLIGATIONS DESCRIBED IN SECTION 103(a) OF THE INTERNAL REVENUE CODE OF 1986, AS AMENDED. WE HAVE ACTED AS BOND COUNSEL for the Corporation for the sole purpose of rendering the opinion expressed herein, and for no other reason or purpose. We have not been requested to investigate or verify, and have not investigated or verified, any records, data or other material relating to the financial condition or capability of the Corporation and have not assumed any responsibility therefor. Respectfully,

43 APPENDIX D SELECTED PROVISIONS OF THE RESOLUTION

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45 SELECTED PROVISIONS OF THE RESOLUTION SECTION 2. Definitions. For all purposes of this Resolution and in particular for clarity with respect to the issuance of the Bonds herein authorized and the pledge and appropriation of revenues to the payment of the Bonds, the following definitions are provided: "Act" Development Corporation Act, Subtitle C1 of Title 12, Texas Local Government Code [formerly Article , TEX. REV. CIV. STAT. ANN.], as amended at any time. "Additional Parity Obligations" Bonds, notes or other evidences of indebtedness which the Corporation reserves the right to issue or enter into, as the case may be, in the future in accordance with the terms and conditions provided in Section 37 hereof and which, together with the Previously Issued Parity Obligations and the Bonds, are equally and ratably secured by a parity pledge of and claim on the Pledged Revenues under the terms of this Resolution and a Supplemental Resolution. "Average Annual Debt Service" That amount which, at the time of computation, is derived by dividing the total amount of Debt Service to be paid over a period of years as the same is scheduled to become due and payable by the number of years taken into account in determining the total Debt Service. Capitalized interest payments provided from proceeds or borrowings of the Corporation shall be excluded in making the aforementioned computation. "Board" The Board of Directors of the Corporation. "Bond" or Bonds Marble Falls Economic Development Corporation Sales Tax Revenue Bonds, Taxable Series 2017", dated December 15, 2016, authorized by this Resolution. Business Day Any day which is not a Saturday, Sunday, or a day on which the Paying Agent/Registrar is authorized by law or executive order to close, or a legal holiday. "City" The City of Marble Falls, Texas. Closing Date The date of initial delivery of and payment for the Bonds. Commercial Lease Agreement with Option to Purchase The lease agreement from the Corporation as lessor to the Developer as lessee by which the Developer will lease the land for the conference center with hotel and related restaurant facilities, including parking, concession services and open space improvements on Corporation owned property. "Corporation" Marble Falls Economic Development Corporation, a non profit industrial development corporation organized and existing under and pursuant to the laws of the State of Texas, including Chapter 505, Texas Local Government Code [formerly Section 4B of Article , TEX. REV. CIV. STAT. ANN.] and on behalf of the City of Marble Falls, Texas.

46 "Debt Service" As of any particular date of computation, with respect to any obligations and with respect to any period, the aggregate of the amounts to be paid or set aside by the Corporation as of such date or in such period for the payment of the principal of, premium, if any, and interest (to the extent not capitalized) on such obligations; assuming, in the case of obligations without a fixed numerical rate, that such obligations bear, or would have borne, interest at the maximum legal per annum rate applicable to such obligations, and further assuming in the case of obligations required to be redeemed or prepaid as to principal prior to maturity, the principal amounts thereof will be redeemed prior to maturity in accordance with the mandatory redemption provisions applicable thereto. "Defeasance Securities " (i) direct noncallable obligations of the United States, including obligations that are unconditionally guaranteed by the United States of America; (ii) noncallable obligations of an agency or instrumentality of the United States, including obligations that are unconditionally guaranteed or insured by the agency or instrumentality and that, on the date the governing body of the issuer adopts or approves the proceedings authorizing the issuance of refunding bonds, are rated as to investment quality by a nationally recognized investment rating firm not less than AAA or its equivalent; or (iii) noncallable obligations of a state or an agency or a county, municipality, or other political subdivision of a state that have been refunded and that, on the date the governing body of the issuer adopts or approves the proceedings authorizing the issuance of refunding bonds, are rated as to investment quality by a nationally recognized investment rating firm not less than AAA or its equivalent. Developer Novak Cobalt Partners, LLC, a Texas limited liability corporation.. Economic Development Performance Agreement The performance agreement pursuant to Section , Texas Local Government Code, between the Corporation and the Developer by which the Developer agrees to provide funds for the a hotel and related restaurant facilities, including parking, concession services and open space improvements on Corporation owned property. Fiscal Year The twelve month financial accounting period used by the Corporation ending September 30 in each year, or such other twelve consecutive month period established by the Corporation. "Gross Sales Tax Revenues" All of the revenues or receipts due or owing to, or collected or received by or on behalf of the Corporation by the City or otherwise from the Sales Tax, less any amounts due and owed to the Comptroller of Public Accounts of the State of Texas as charges for the collection of the Sales Tax or retention by said Comptroller for refunds and to redeem dishonored checks and drafts, to the extent such charges and retention are authorized or required by law. Interest Payment Date The date or dates upon which interest on each Bond is scheduled to be paid until their respective dates of maturity or prior redemption, such dates being February 1 and August 1 of each year, commencing August 1, 2017.

47 "Outstanding" When used in this Resolution with respect to the Bonds or Parity Obligations, as the case may be, means, as of the date of determination, all Bonds and Parity Obligations theretofore sold, issued and delivered by the Corporation, except: (1) those Bonds or Parity Obligations canceled or delivered to the transfer agent or registrar for cancellation in connection with the exchange or transfer of such obligations; (2) those Bonds or Parity Obligations paid or deemed to be paid in accordance with the provisions of Section 43 hereof or similar provisions of any Supplemental Resolution authorizing the issuance of Additional Parity Obligations; and (3) those Bonds or Parity Obligations that have been mutilated, destroyed, lost, or stolen and replacement obligations have been registered and delivered in lieu thereof. "Parity Obligations" Collectively, the Bonds, the Previously Issued Parity Obligations and Additional Parity Obligations. Paying Agent or "Paying Agent/Registrar" Initially BOKF, NA, Austin, Texas, or any successor thereto as provided in this Resolution. "Pledged Revenues" Collectively (i) Gross Sales Tax Revenues from time to time deposited or owing to the Pledged Revenue Fund and (ii) such other money, income, revenue, receipts or other property as may be specifically dedicated, pledged or otherwise encumbered in a Supplemental Resolution for the payment and security of Parity Obligations. Previously Issued Parity Obligations The Corporation s Sales Tax Revenue Refunding Bond, Taxable Series 2012 and Sales Tax Revenue Bond, Taxable Series Project The providing of funds for the design and construction of a conference center with a hotel and related restaurant facilities, including parking, concession services and open space improvements on Corporation owned property for the purpose of promoting new or expanded business development in the City. "Required Reserve" The amount, if any, required to be accumulated and maintained in the Reserve Fund under the provisions of Section 32 hereof. "Sales Tax" The local sales and use tax authorized under Chapter 505, Texas Local Government Code [formerly Section 4B of Article , TEX. REV. CIV. STAT. ANN.], approved at an election held on May 12, 2007, at a rate of one half of one percent (1/2%), and levied by the City on behalf of the Corporation. Underwriter Raymond James & Associates, Inc. SECTION 17. Pledge. The Corporation hereby covenants and agrees that the Pledged Revenues are hereby irrevocably pledged to the payment and security of the Bonds, Previously Issued Parity

48 Obligations and Additional Parity Obligations, if issued, including the establishment and maintenance of the special funds created and established in this Resolution and any Supplemental Resolution, all as hereinafter provided. The Corporation hereby resolves the Parity Obligations shall constitute a lien on the Pledged Revenues in accordance with the terms of this Resolution and any Supplemental Resolution, which lien shall be valid and binding without any further action by the Corporation and without any filing or recording with respect thereto except in the records of the Corporation. SECTION 18. Effect of Pledge. Chapter 1208, Texas Government Code, applies to the issuance of the Bonds and the pledge of the Pledged Revenues thereof granted by the Corporation under Section 17 of this Resolution, and such pledge is therefore valid, effective, and perfected. If Texas law is amended at any time while the Bonds are outstanding and unpaid such that the pledge of the Pledged Revenues granted by the Corporation under Section 17 of this Resolution is to be subject to the filing requirements of Chapter 9, Business & Commerce Code, then in order to preserve to the Registered Owners of the Bonds the perfection of the security interest in said pledge, the Corporation agrees to take such measures as it determines are reasonable and necessary under Texas law to comply with the applicable provisions of Chapter 9, Business & Commerce Code, and enable a filing to perfect the security interest in said pledge to occur. Section 29. Special Funds. A. Funds Confirmed. The following special funds have been or are hereby created and are confirmed, established, maintained, and accounted for as hereinafter provided so long as any of the Parity Obligations remain Outstanding: (i) (ii) (iii) Pledged Revenue Fund ( the Pledged Revenue Fund ); Bond Fund (the Bond Fund ); and Reserve Fund (the Reserve Fund"). The Funds shall constitute special funds which shall be held for the benefit of the Owners, and the income from the investment of which shall be and is hereby pledged to the payment of the Parity Obligations. All of the Funds shall be used solely as herein provided so long as any Parity Obligations remain Outstanding. SECTION 30. Pledged Revenue Fund. The Corporation hereby agrees and covenants to establish and maintain a fund or account at a Depository for the deposit of the Pledged Revenues as received by the Corporation, which fund or account shall be known on the books and records of the Corporation as the "Pledged Revenue Fund". All Pledged Revenues deposited to the credit of such Fund shall be accounted for separate and apart from all other revenues, receipts and income of the Corporation and, with respect to the Gross Sales Tax Revenues, the Corporation shall further account for such funds separate and apart from the other Pledged Revenues deposited to the credit of the Pledged Revenue Fund. All Pledged Revenues deposited to the credit of the Pledged Revenue Fund shall be appropriated and expended to the extent required by this Resolution and any Supplemental Resolution for the following uses and in the order of priority shown:

49 First: To the payment of the amounts required to be deposited in the Bond Fund for the payment of Debt Service on the Parity Obligations as the same becomes due and payable; Second: To the payment of the amounts required to be deposited in the Reserve Fund to establish and maintain the Required Reserve in accordance with the provisions of this Resolution and any Supplemental Resolution; Third: To the payment of amounts required to be deposited in any other fund or account required by any Supplemental Resolution authorizing the issuance of Parity Obligations; and Fourth: To any fund or account held at any place or places, or to any payee, required by any other resolution of the Board which authorized the issuance of obligations or the creation of debt of the Corporation having a lien on the Pledged Revenues subordinate to the lien created herein on behalf of the Parity Obligations. Any Pledged Revenues remaining in the Pledged Revenue Fund after satisfying the foregoing payments, or making adequate and sufficient provision for the payment thereof, may be appropriated and used for any other lawful purpose now or hereafter permitted by law. SECTION 31. Bond Fund. For the purpose of providing funds to pay the principal of and interest on Parity Obligations, the Corporation agrees and covenants to maintain a separate and special account or fund on the books and records of the Corporation known as Marble Falls Economic Development Corporation Debt Service Account (the "Bond Fund"), and all monies deposited to the credit of such Fund shall be held in a special banking fund or account maintained at a Depository of the Corporation. The Corporation covenants that there shall be deposited into the Bond Fund prior to each principal and interest payment date from the Pledged Revenues an amount equal to one hundred percent (100%) of the interest on and the principal of the Bonds then falling due and payable, and such deposits to pay principal and accrued interest on the Bonds shall be made in substantially equal monthly installments on or before the 20th day of each month, beginning on or before the 20th day of the month next following the delivery of the Bonds to the initial purchaser(s). The required deposits to the Bond Fund for the payment of principal of and interest on the Bonds shall continue to be made as hereinabove provided until (i) the total amount on deposit in the Bond Fund and Reserve Fund is equal to the amount required to fully pay and discharge all Parity Obligations (principal and interest) then Outstanding or (ii) the Bonds are no longer Outstanding. SECTION 32. Reserve Fund. (a) The Corporation shall establish a "Reserve Fund" for the Bonds on or before the Closing Date of the Bonds. Concurrently with the delivery of the Bonds to the initial purchaser(s) thereof, the Corporation shall transfer to the Reserve Fund an amount equal to an amount equal to the average annual principal and interest requirements of the Bonds (the Required Reserve ). The average annual debt service requirements of the Bonds shall be calculated by the Corporation on the date of issuance of the Bonds and on each October 1 thereafter, and the Required Reserve to be maintained in the Reserve Fund after each such calculation shall be the amount determined by such calculation. When and for so long as

50 the cash, investments and reserve fund surety policy in the Reserve Fund equal the Required Reserve, no deposits need be made to the credit of the Reserve Fund. (b) If the Reserve Fund at any time contains less than the Required Reserve, the Corporation covenants and agrees that the Corporation shall cure the deficiency in the Reserve Fund by making deposits to such Fund from the Pledged Revenues, in the order of priority described above, by monthly deposits and credits in amounts equal to not less than 1/60th of the Required Reserve with any such deficiency payments being made on or before the last day of each month until the Required Reserve has been fully restored; provided, however, that no such deposits shall be made into the Reserve Fund during any six month period beginning on August 1 and February 1 until there has been deposited into the Bond Fund the full amount required to be deposited therein by the next following August 1 and February 1, as the case may be. If the Reserve Fund at any time contains less than the Required Reserve, the Corporation covenants and agrees that the Corporation shall cure the deficiency in the Reserve Fund by making deposits to such Fund from the Pledged Revenues, in the order of priority described above, by monthly deposits and credits in amounts equal to not less than 1/60th of the Required Reserve with any such deficiency payments being made on or before the last day of each month until the Required Reserve has been fully restored; provided, however, that no such deposits shall be made into the Reserve Fund during any six month period beginning on August 1 and February 1 until there has been deposited into the Bond Fund the full amount required to be deposited therein by the next following August 1 and February 1, as the case may be. In addition, in the event that a portion of the Required Reserve is represented by a reserve fund surety policy (see Surety Policy in subparagraph (d) below), the Required Reserve and deposits to the Reserve Fund shall take into account such value of the reserve fund surety policy. The Corporation has further covenanted and agreed that, subject only to the prior deposits and credits to be made to the Bond Fund, the Pledged Revenues shall be applied, appropriated and used to establish and maintain the Required Reserve, including by paying payments under a reserve fund surety policy when due, and any reserve established for the benefit of any issue or series of Additional Parity Obligations and to cure any deficiency in such amounts as required by the terms of this Resolution and any other resolution pertaining to the issuance of Additional Parity Obligations. (c) Notwithstanding anything to the contrary contained in the Resolution, as herein described, the requirements described above to fund the Reserve Fund in the amount of the Required Reserve shall be suspended for such time as the Pledged Revenues for each fiscal year are equal to at least 110% of the average annual debt service requirements. In the event that the Pledged Revenues for any two consecutive Fiscal Years are less than 110% (unless such percentage is below 100% of the average annual debt service requirements in any fiscal year, in which case the herein specified requirements to restore the Required Reserve will commence after such fiscal year) of the average annual debt service requirements, the Corporation will be required to commence making the deposits to fund the Reserve Fund as provided above, and to continue making such deposits until the earlier of (i) such time as the Reserve Fund contains the Required Reserve or (ii) the Pledged Revenues for a fiscal year have been equal to not less than 110% of the average annual debt service requirements. (d) Surety Policy. Notwithstanding the above (and with the consent of the Holders), the Corporation reserves the right to provide for the Required Reserve by use of a surety bond in lieu of cash, or a combination of cash and surety bond, as the Corporation deems reasonable and appropriate; provided, however, that the amount of any such cash and/or the coverage by any surety bond when added together shall at least equal the Required Reserve. Any such surety bond provided in lieu of cash shall be

51 issued by an insurance company or association of companies whose insured obligations are rated at the time of issuance by a nationally recognized rating agency in its highest rating categories. On the first day following the use of proceeds or amounts available for withdrawal on deposit in the Reserve Fund and continuing each month thereafter for a total of not less than 60 payments, the Corporation shall repay all amounts drawn on the surety bond and then replenish any cash required in the Reserve Fund to restore the Required Reserve. In the event a reserve fund surety policy causes the amount then on deposit in the Reserve Fund to exceed the Required Reserve, such excess amount may be transferred to any fund or account established for the payment or security of the Bonds or used for any lawful purpose; provided, however, to the extent that such excess amount represents bond proceeds, then such amount must be transferred to the Bond Fund. SECTION 33. Deficiencies. If on any occasion there shall not be sufficient Pledged Revenues to make the required deposits into the Bond Fund or Reserve Fund, such deficiency shall be cured as soon as possible from the next available Pledged Revenues, or from any other sources available for such purpose. SECTION 34. Payment of Bonds. While the Bond is Outstanding, the Treasurer of the Corporation (or other designated financial officer of the Corporation) shall cause to be transferred to the Paying Agent/Registrar, from funds on deposit in the Bond Fund, and, if necessary, in the Reserve Fund, amounts sufficient to fully pay and discharge promptly as each installment of interest and principal of the Bonds accrues or matures; such transfer of funds to be made in such manner as will cause immediately available funds to be deposited with the Paying Agent/Registrar for the Bonds at the close of the Business Day next preceding the date of payment for the Bonds. SECTION 35. Project Fund. The amount of $6,500,000 from the proceeds of the sale of the Bonds shall be deposited in a separate account entitled the Project Fund at the time of the delivery of the Bonds. The funds deposited in the Project Fund shall be held and will be disbursed to the Developer, as provided in the Amended and Restated Economic Development Performance Agreement for the purpose of providing funds for the design and construction of a conference center with a hotel and related restaurant facilities, including parking, concession services and open space improvements on Corporation owned property for the purpose of promoting new or expanded business development in the City.. SECTION 36. Investments Security of Funds. (a) Money in any Fund required to be maintained pursuant to this Resolution may, at the option of the Corporation, be invested in obligations and in the manner prescribed by the Public Funds Investment Act, Chapter 2256, Texas Government Code, including investments held in book entry form; provided that all such deposits and investments shall be made in such a manner that the money required to be expended from any Fund will be available at the proper time or times and provided further the maximum stated maturity for any investment acquired with money deposited to the credit of the Reserve Fund shall be limited to five (5) years from the date of the investment of such money. Such investments shall be valued in terms of current market value within 45 days of the close of each Fiscal Year and, with respect to investments held for the account of the Reserve Fund, within 45 days of the date of passage of each authorizing document of the Board pertaining to the issuance of Additional Parity Obligations. All interest and income derived from deposits and investments in the Bond Fund immediately shall be credited to, and any losses debited to, the appropriate account of the Bond Fund. All interest and interest income derived from deposits in and investments of the Reserve Fund shall, subject to the limitations

52 provided in Section 32 hereof, be credited to and deposited in the Pledged Revenue Fund. All such investments shall be sold promptly when necessary to prevent any default in connection with the Parity Obligations. (b) That money deposited to the credit of the Pledged Revenue Fund, Bond Fund and Reserve Fund, to the extent not invested and not otherwise insured by the Federal Deposit Insurance Corporation or similar agency, shall be secured by a pledge of direct obligations of the United States of America, or obligations unconditionally guaranteed by the United States of America. SECTION 37. Issuance of Additional Parity Obligations. Subject to the provisions hereinafter appearing as to conditions precedent which must be satisfied, the Corporation reserves the right to issue, from time to time as needed, Additional Parity Obligations for any lawful purpose. Such Additional Parity Obligations may be issued in such form and manner as the Corporation shall determine, provided, however, prior to issuing or incurring such Additional Parity Obligations, the following conditions precedent for the authorization and issuance of the same are satisfied, to wit: (1) The Treasurer of the Corporation (or other officer of the Corporation then having the primary responsibility for the financial affairs of the Corporation) shall have executed a certificate stating that, to the best of his or her knowledge and belief, the Corporation is not then in default as to any covenant, obligation or agreement contained in the Resolution or a Supplemental Resolution. (2) The Corporation has secured from a certified public accountant a certificate or opinion to the effect that, according to the books and records of the Corporation, the Gross Sales Tax Revenues received by the Corporation for either (i) the last completed Fiscal Year next preceding the adoption of the Supplemental Resolution authorizing the issuance of the proposed Additional Parity Obligations or (ii) any twelve (12) consecutive months out of the previous eighteen (18) months next preceding the adoption of the Supplemental Resolution authorizing the Additional Parity Obligations were equal to not less than 1.50 times the maximum annual Debt Service for all Parity Obligations then Outstanding after giving effect to the issuance of the Additional Parity Obligations then being issued. (3) The Required Reserve to be accumulated and maintained in the Reserve Fund is increased to the extent required by Section 32. SECTION 38. Refunding Bonds. The Corporation reserves the right to issue refunding bonds to refund all or any part of the Parity Obligations (pursuant to any law then available) upon such terms and conditions as the Board may deem to be in the best interest of the Corporation, and if less than all such Parity Obligations then Outstanding are refunded, the conditions precedent prescribed (for the issuance of Additional Parity Obligations) set forth in Section 37 hereof shall be satisfied, and shall give effect to the refunding. SECTION 39. Right to Create Subordinate Debt. Except as may be limited by a Supplemental Resolution, the Corporation shall have the right to issue or create any debt payable from or secured by a lien on all or any part of the Pledged Revenues for any lawful purpose without complying with the provisions of Section 37 or 38 hereof, provided the pledge and the lien securing such debt is subordinate

53 to the pledge and lien established, made and created in Section 17 of this Resolution with respect to the Pledged Revenues to the payment and security of the Parity Obligations. SECTION 40. Confirmation and Levy of Sales Tax. (a) The Board hereby represents the City has duly complied with the provisions of the Act for the levy of the Sales Tax at the rate voted at the election held by and within the City on May 12, 2007, and such Sales Tax is being imposed within the corporate limits of the City and the receipts of such Sales Tax are being remitted to the City by the Comptroller of Public Accounts on a monthly basis. (b) While any Bond is Outstanding, the Corporation covenants, agrees and warrants to take and pursue all action permissible to cause the Sales Tax, at said rate or at a higher rate if legally permitted, to be levied and collected continuously, in the manner and to the maximum extent permitted by law, and to cause no reduction, abatement or exemption in the Sales Tax or rate of tax below the rate stated, confirmed and ordered in subsection (a) of this Section to be ordered or permitted while any Bond shall remain Outstanding. (c) If hereafter authorized by law to apply, impose and levy the Sales Tax on any taxable items or transactions that are not subject to the Sales Tax on the date of the adoption hereof, to the extent it legally may do so, the Corporation agrees to use its best efforts to cause the City to take such action as may be required to subject such taxable items or transactions to the Sales Tax. (d) The Corporation agrees to take and pursue all action legally permissible to cause the Sales Tax to be collected and remitted and deposited as herein required and as required by Chapter 505, Texas Local Government Code, at the earliest and most frequent times permitted by law. (e) The Corporation agrees to use its best efforts to cause the City to comply with Chapter 505, Texas Local Government Code, and shall cause the Gross Sales Tax Revenues to be deposited to the credit of the Pledged Revenue Fund in their entirety immediately upon receipt by the City. In the alternative and if legally authorized, the Corporation shall, by appropriate notice, direction, request or other legal method, use its good faith efforts to cause the Comptroller of Public Accounts of the State of Texas (the Comptroller ) to pay all Gross Sales Tax Revenues directly to the Corporation for deposit to the Pledged Revenue Fund. SECTION 41. Records and Accounts. The Corporation hereby covenants and agrees that while any of the Bonds are Outstanding, it will keep and maintain complete records and accounts in accordance with generally accepted accounting principles, and following the close of each Fiscal Year, it will cause an audit of such books and accounts to be made by an independent firm of certified public accountants. Each such audit, in addition to whatever other matters may be thought proper by the accountant shall particularly include the following: (1) A statement in reasonable detail regarding the receipt and disbursement of the Pledged Revenues for such Fiscal Year, and (2) A balance sheet for the Corporation as of the end of such Fiscal Year.

54 Such annual audit of the records and accounts of the Corporation shall be in the form of a report and be accompanied by an opinion of the accountant to the effect that such examination was made in accordance with generally accepted auditing standards and contain a statement to the effect that in the course of making the examination necessary for the report and opinion, the accountant obtained no knowledge of any default of the Corporation on the Bond or in the fulfillment of any of the terms, covenants or provisions of this Resolution, or under any other evidence of indebtedness, or of any event which, with notice or lapse of time, or both, would constitute a failure of the Corporation to comply with the provisions of this Resolution or if, in the opinion of the accountants, any such failure to comply with a covenant or agreement hereof, a statement as to the nature and status thereof shall be included. Copies of each annual audit report shall be furnished upon written request, to any Holders of any of the Bonds. The audits herein required shall be made within 120 days following the close of each Fiscal Year insofar as is possible. The Holders of any Bonds or any duly authorized agent or agents of such Holders shall have the right to inspect such records, accounts and data of the Corporation during regular business hours. SECTION 42. Representations as to Security for the Bond. (a) The Corporation represents and warrants that, except for the Parity Obligations, the Pledged Revenues are and will be and remain free and clear of any pledge, lien, charge or encumbrance thereon or with respect thereto prior to, or of equal rank with, the pledge and lien created in or authorized by this Resolution except as expressly provided herein. (b) The Bonds and the provisions of this Resolution are and will be the valid and legally enforceable obligations of the Corporation in accordance with their terms and the terms of this Resolution, subject only to any applicable bankruptcy or insolvency laws or to any laws affecting creditors rights generally. (c) The Corporation shall at all times, to the extent permitted by law, defend, preserve and protect the pledge of the Pledged Revenues and all the rights of the Holders against all claims and demands of all persons whomsoever, and shall take such action necessary to protect the priority of the pledge of the Pledged Revenues. (d) The Corporation will take, and use its best efforts to cause the City to take, all steps reasonably necessary and appropriate to collect all delinquencies in the collection of the Sales Tax to the fullest extent permitted by the Act. (e) The provisions, covenants, pledge and lien on and against the Pledged Revenues, as herein set forth, are established and shall be for the equal benefit, protection and security of the Owners and Holders of Parity Obligations without distinction as to priority and rights under this Resolution. (f) The Parity Obligations shall constitute special obligations of the Corporation, payable solely from, and equally and ratably secured by a parity pledge of and lien on, the Pledged Revenues, and not from any other revenues, properties or income of the Corporation. The Bonds may not be paid in whole or in part from any property taxes raised or to be raised by the City and shall not constitute debts or obligations of the State or of the City, and the Holders, shall never have the right to demand payment out of any funds raised or to be raised by any system of ad valorem taxation.

55 SECTION 43. Satisfaction of Obligation of Corporation. If the Corporation shall pay or cause to be paid, or there shall otherwise be paid to the Holders, the principal of, premium, if any, and interest on the Bonds, at the times and in the manner stipulated in this Resolution, then the pledge of the Pledged Revenues under this Resolution and all other obligations of the Corporation to the Holders shall thereupon cease, terminate, and be discharged and satisfied. Bonds or any principal amount(s) shall be deemed to have been paid within the meaning and with the effect expressed above in this Section when (i) money sufficient to pay in full such Bonds at maturity or to the redemption date therefor, together with all interest due thereon, shall have been irrevocably deposited with and held in trust by the Paying Agent/Registrar, or an authorized escrow agent, or (ii) Defeasance Securities shall have been irrevocably deposited in trust with the Paying Agent/Registrar, or an authorized escrow agent, which Defeasance Securities have been certified by an independent accounting firm to mature as to principal and interest in such amounts and at such times as will insure the availability, without reinvestment, of sufficient money, together with any moneys deposited therewith, if any, to pay when due the Bonds on the Stated Maturities thereof or (if notice of redemption has been duly given or waived or if irrevocable arrangements therefor accepted to the Paying Agent/Registrar have been made) the redemption date thereof. The Corporation covenants that no deposit of moneys or Defeasance Securities will be made under this Section and no use made of any such deposit which would cause the Bonds to be treated as "arbitrage bonds" within the meaning of Section 148 of the Internal Revenue Code of 1986, as amended (the Code ), or regulations adopted pursuant thereto. Any moneys so deposited with the Paying Agent/Registrar or an authorized escrow agent and all income Defeasance Securities held in trust by the Paying Agent/Registrar, or an authorized escrow agent, pursuant to this Section in excess of the amount required for the payment of the Bonds shall be remitted to the Corporation or deposited as directed by the Corporation. Furthermore, any money held by the Paying Agent/Registrar for the payment of the principal of and interest on the Bonds and remaining unclaimed for a period of four (4) years after the Stated Maturity, or applicable redemption date, of the Bonds such moneys were deposited and are held in trust to pay shall, upon the request of the Corporation, be remitted to the Corporation against a written receipt therefor. Notwithstanding the above and foregoing, any remittance of funds from the Paying Agent/Registrar to the Corporation shall be subject to any applicable unclaimed property laws of the State of Texas. Section 51. Defeasance of Bonds. (a) Defeased Bonds. Any Bond and the interest thereon shall be deemed to be paid, retired and no longer Outstanding (a "Defeased Bond"), except to the extent provided in subsection (d) of this Section, when payment of the principal of such Bond, plus interest thereon to the due date (whether such due date be by reason of maturity or otherwise) either (i) shall have been made or caused to be made in accordance with the terms thereof, or (ii) shall have been provided for on or before such due date by irrevocably depositing with or making available to the Paying Agent/Registrar in accordance with an escrow agreement or other similar instrument (the "Future Escrow Agreement") for such payment (1) lawful money of the United States of America sufficient to make such payment or (2) Defeasance Securities that mature as to principal and interest in such amounts and at such times as will insure the availability, without reinvestment, of sufficient money to provide for such payment, and when proper arrangements have been made by the Corporation with the Paying Agent/Registrar for the payment of its services until all Defeased Bonds shall

56 have become due and payable. At such time as a Bond shall be deemed to be a Defeased Bond hereunder, as aforesaid, such Bond and the interest thereon shall no longer be secured by, payable from, or entitled to the benefits of, the Pledged Revenues, and such principal and interest shall be payable solely from such money or Defeasance Securities. (b) Investment in Defeasance Securities. Any moneys so deposited with the Paying Agent/Registrar may at the written direction of the Corporation be invested in Defeasance Securities, maturing in the amounts and times as hereinbefore set forth, and all income from such Defeasance Securities received by the Paying Agent/Registrar that is not required for the payment of the Bonds and interest thereon, with respect to which such money has been so deposited, shall be turned over to the Corporation, or deposited as directed in writing by the Corporation. Any Future Escrow Agreement pursuant to which the money and/or Defeasance Securities are held for the payment of Defeased Bonds may contain provisions permitting the investment or reinvestment of such moneys in Defeasance Securities or the substitution of other Defeasance Securities upon the satisfaction of the requirements specified in subsections (a)(i) or (ii) of this Section. All income from such Defeasance Securities received by the Paying Agent/Registrar which is not required for the payment of the Defeased Bonds, with respect to which such money has been so deposited, shall be remitted to the Corporation or deposited as directed in writing by the Corporation. (c) Paying Agent/Registrar Services. Until all Defeased Bonds shall have become due and payable, the Paying Agent/Registrar shall perform the services of Paying Agent/Registrar for such Defeased Bonds the same as if they had not been defeased, and the Corporation shall make proper arrangements to provide and pay for such services as required by this Resolution. (d) Selection of Bonds for Defeasance. In the event that the Corporation elects to defease less than all of the principal amount of Bonds of a maturity, the Paying Agent/Registrar shall select, or cause to be selected, such amount of Bonds by such random method as it deems fair and appropriate

57 APPENDIX E EXCERPTS FROM THE CITY OF MARBLE FALLS, TEXAS AUDITED FINANCIAL STATEMENTS FOR FISCAL YEAR ENDED SEPTEMBER 30, 2015

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113 APPENDIX F SPECIMEN MUNICIPAL BOND INSURANCE POLICY

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115 MUNICIPAL BOND INSURANCE POLICY ISSUER: [NAME OF ISSUER] Policy No: MEMBER: [NAME OF MEMBER] BONDS: $ in aggregate principal amount of [NAME OF TRANSACTION] [and maturing on] Effective Date: Risk Premium: $ Member Surplus Contribution: $ Total Insurance Payment: $ BUILD AMERICA MUTUAL ASSURANCE COMPANY ( BAM ), for consideration received, hereby UNCONDITIONALLY AND IRREVOCABLY agrees to pay to the trustee (the Trustee ) or paying agent (the Paying Agent ) for the Bonds named above (as set forth in the documentation providing for the issuance and securing of the Bonds), for the benefit of the Owners or, at the election of BAM, directly to each Owner, subject only to the terms of this Policy (which includes each endorsement hereto), that portion of the principal of and interest on the Bonds that shall become Due for Payment but shall be unpaid by reason of Nonpayment by the Issuer. On the later of the day on which such principal and interest becomes Due for Payment or the first Business Day following the Business Day on which BAM shall have received Notice of Nonpayment, BAM will disburse (but without duplication in the case of duplicate claims for the same Nonpayment) to or for the benefit of each Owner of the Bonds, the face amount of principal of and interest on the Bonds that is then Due for Payment but is then unpaid by reason of Nonpayment by the Issuer, but only upon receipt by BAM, in a form reasonably satisfactory to it, of (a) evidence of the Owner s right to receive payment of such principal or interest then Due for Payment and (b) evidence, including any appropriate instruments of assignment, that all of the Owner s rights with respect to payment of such principal or interest that is Due for Payment shall thereupon vest in BAM. A Notice of Nonpayment will be deemed received on a given Business Day if it is received prior to 1:00 p.m. (New York time) on such Business Day; otherwise, it will be deemed received on the next Business Day. If any Notice of Nonpayment received by BAM is incomplete, it shall be deemed not to have been received by BAM for purposes of the preceding sentence, and BAM shall promptly so advise the Trustee, Paying Agent or Owner, as appropriate, any of whom may submit an amended Notice of Nonpayment. Upon disbursement under this Policy in respect of a Bond and to the extent of such payment, BAM shall become the owner of such Bond, any appurtenant coupon to such Bond and right to receipt of payment of principal of or interest on such Bond and shall be fully subrogated to the rights of the Owner, including the Owner s right to receive payments under such Bond. Payment by BAM either to the Trustee or Paying Agent for the benefit of the Owners, or directly to the Owners, on account of any Nonpayment shall discharge the obligation of BAM under this Policy with respect to said Nonpayment. Except to the extent expressly modified by an endorsement hereto, the following terms shall have the meanings specified for all purposes of this Policy. Business Day means any day other than (a) a Saturday or Sunday or (b) a day on which banking institutions in the State of New York or the Insurer s Fiscal Agent (as defined herein) are authorized or required by law or executive order to remain closed. Due for Payment means (a) when referring to the principal of a Bond, payable on the stated maturity date thereof or the date on which the same shall have been duly called for mandatory sinking fund redemption and does not refer to any earlier date on which payment is due by reason of call for redemption (other than by mandatory sinking fund redemption), acceleration or other advancement of maturity (unless BAM shall elect, in its sole discretion, to pay such principal due upon such acceleration together with any accrued interest to the date of acceleration) and (b) when referring to interest on a Bond, payable on the stated date for payment of interest. Nonpayment means, in respect of a Bond, the failure of the Issuer to have provided sufficient funds to the Trustee or, if there is no Trustee, to the Paying Agent for payment in full of all principal and interest that is Due for Payment on such Bond. Nonpayment shall also include, in respect of a Bond, any payment made to an Owner by or on behalf of the Issuer of principal or interest that is Due for Payment, which payment has been recovered from such Owner pursuant to the United States Bankruptcy Code in accordance with a final, nonappealable order of a court having competent jurisdiction. Notice means delivery to BAM of a notice of claim and certificate, by certified mail, or telecopy as set forth on the attached Schedule or other acceptable electronic delivery, in a form satisfactory to BAM, from and signed by an Owner, the Trustee or the Paying Agent, which notice shall specify (a) the person or entity making the claim, (b) the Policy Number, (c) the claimed amount, (d) payment instructions and (e) the date such claimed amount becomes or became Due for Payment. Owner means, in respect of a Bond, the person or entity who, at the time of Nonpayment, is entitled under the terms of such Bond to payment thereof, except that Owner shall not include the Issuer, the Member or any other person or entity whose direct or indirect obligation constitutes the underlying security for the Bonds.